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Starbucks’ fiscal year 2020 results reflect the challenges businesses face worldwide due to the COVID-19 pandemic. It severely impacted the company’s results, especially in the second and third fiscal quarters. Consolidated revenues fell 11% to $23.5 billion in fiscal 2020 from $26.5 billion in fiscal 2019 (Starbucks Investor Relations, n.d.). This was due to the temporary closure of a significant number of our company-operated and licensed stores, as well as changes in business operations and reduced customer traffic. In fiscal 2020, comparable store sales in the U.S. segment decreased 12%. This was primarily due to temporary store closures, lower customer traffic, and reduced store hours. The most damaging impact occurred in the third quarter of fiscal 2020.
Most of the company-operated and licensed stores had reopened by early May. More than 60% of the company-operated stores in the United States provided limited seating capacity by the end of the fiscal year. The company also incurred additional labor costs, including payroll costs for associates who were unable or unwilling to work from mid-March through May. At this point, there has been an initial recovery in the business. Starbucks stores are gradually reopening to meet changed operating conditions to meet health codes and changing customer behavior and expectations. As of today, nearly all of the company-operated and licensed stores have been reopened. Those stores that have remained closed are located in tourist or transportation hubs and central business districts.
Regarding the outlook for the future, Starbuck’s business is steadily recovering. Meanwhile, China is approaching recovery in comparable-store sales, and the U.S. shows continued sales and profitability growth. The channel development segment continues to gain share in the category as customers transition to home shopping. Revenue in this segment is expected to decline in the next fiscal year as the coffee-selling business has been shifted from a one-time feed to a royalty-based model. The company does not expect this change to have a significant impact on revenues. However, this change is expected to have a stimulative impact on the segment’s operating margin.
Reference
Starbucks Investor Relations. (n. d.). Latest Annual Reports. Starbucks Investor Relations.
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