Starbucks Financial Conference

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This is a project presentation for Managerial Accounting course. In the form of a corporate financial conference, we aim to convey the company background and financial predictions to investors to persuade them into continue investing in Starbucks.

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Starbucks Financial Conference

  1. 1. ’<br />Project II<br />Starbucks<br />Presented by Neo, Julia, Judy, Sophia, Zac<br />
  2. 2. Financial Conference<br />
  3. 3. Agenda<br /><ul><li>Introduction
  4. 4. Strategy Analysis
  5. 5. Financial forecasting : US, International, CPG, Other
  6. 6. Conclusion</li></li></ul><li>Introduction<br /><ul><li>Fiscal 2010 Overview
  7. 7. Fiscal 2010 Highlights</li></li></ul><li>Fiscal 2010 Operating Performance Overview<br /><ul><li>Largest coffeehouse company globally
  8. 8. Four major segments:</li></ul>US, International, Consumer Products Group, Other<br /><ul><li>As of 2010, over 17,000 stores in 50 countries</li></li></ul><li>Fiscal 2010Financial Highlights<br />
  9. 9. Comparable Sales Growth<br />
  10. 10. Net Revenue<br />
  11. 11. EPS<br />
  12. 12. Strategy Evaluation<br />
  13. 13. Diversifying Products and Services<br /><ul><li>Drip brewed coffee, espresso-based hot drinks
  14. 14. Coffee beans, salads, sandwiches and snacks
  15. 15. Starbucks Entertainment division: marketing books, music, and film</li></li></ul><li>Developing New Markets<br /><ul><li>Emerging economies: China, Brazil, India
  16. 16. New potential segments: Packaged coffee, VIA® Ready Brew</li></li></ul><li>Fair Trade Campaign<br /><ul><li>Continue direct supply strategy
  17. 17. Reduce intermediary suppliers
  18. 18. Benefit both poor famers and Starbucks
  19. 19. Build Starbucks’ brand equity</li></li></ul><li>Financial Forecasting<br /><ul><li>U.S. Segment
  20. 20. International Segment
  21. 21. CPG & Others</li></li></ul><li>US Segment<br />---selling coffee and other beverages, complementary food, whole bean coffees and a focused selection of merchandise<br /><ul><li>Around 70% of total sales
  22. 22. 11575 stores in 2009
  23. 23. Most mature market segment
  24. 24. Cash cow</li></li></ul><li>Influencing factors<br />Revenue <br />Gradual recovery of economy<br />New opening stores<br />Cost<br />Direct purchasing strategy<br />
  25. 25. Revenue<br />7.32%<br />6.60%<br />(7.32%+ 6.60 % )/2 = 6.96%<br />$7,560.4 * (1=6.96%) = $8086.60 <br />
  26. 26. Cost<br />Direct purchasing strategy<br />2010 cost of sales as a percentage of total revenue 3.3%1. further research cost2. finding more farmers <br />Assumption: Further decrease 2.5%<br />8086.6*(79.9%-2.5%)= $6,259.03<br />
  27. 27. The United States<br />2011<br />2010<br />2009<br />$7061.7<br />$8086.60<br />$7560.4<br />Sales Revenue<br />2903.09<br />2906.1<br />2941.4<br />Cost of sales<br />57.69<br />55.6<br />66.6<br />Other operating expenses<br />32.35<br />27.2<br />246.3<br />Restruction expenses<br />160.65<br />350.7<br />377.9<br />Depreciation and Amortization<br />2831.9<br />2815.1<br />2992.04<br />Store operating expense<br />97.8<br />General and Administrative<br />113.21<br />84.8<br />$6259.03<br />$6269.3<br />$6532.1<br />Total cost<br />$1827.57<br />$1291.1<br />$529.6<br />Operating income<br />Budgeted I/S for US Segment<br />
  28. 28. International Segment<br />Similar product categories as the U.S segment (20%)<br />Operate in nearly 40 countries, primarily in the UK and Canada (64%)<br /> Strong international presence<br /> Objective: pursue for sustainable growth and expand into key potential markets, e.g. China and Brazil<br />
  29. 29. Influencing Factors<br /><ul><li>Revenues:</li></ul>-Global economies (consumers’ discretionary spending)<br />-New store openings<br />-Foreign exchange rates<br />Costs & Expenses:<br />-Direct purchasing strategy<br />
  30. 30. Revenue<br />1. Economic recovery <br />- higher consumer discretionary spending <br />2. 400 new shop opening plan<br />3. Favorable exchange rate trend <br />
  31. 31. Estimated Revenue:<br />Similar conditions as year 2007 and 2009,<br />Growth rate: take average of 24% (2007) and 19.56% (2009)<br />Revenue<br />$2288.88*(1+22%)=$2792.43<br />
  32. 32. Cost<br />1. Continue direct purchasing strategy<br /><ul><li>similar to the U.S segment, COGS reduces by 5.5%</li></ul>* Therefore, assuming other expenses remain constant, budgeted total cost will be 87.9% of revenue, or $2,454.55 million in 2011.<br />
  33. 33. Budgeted I/S for International Segment<br />
  34. 34. CPG<br />CPG: customer products group<br />New products: VIA®<br />Revenue of CPG just reduce 0.96% during the financial crisis & increased 4.66% in 2010<br />
  35. 35. CPG<br />Main focus is to expand this new product<br />Assume the growth rate may have a positive growth rate of 20%<br />The total cost will again increase by 3%<br />
  36. 36. Other<br />Revenues generate from the Seattle’s Best Coffee (1%)<br />Will increase from 3,000 points of distribution to more than 30,000<br />Grow 38% in 4th quarter of 2010 <br />
  37. 37. Other<br />Keep the increasing trend and grow at approximately 40%<br />Predict a 4% growth in operating loss for 2011<br />
  38. 38. CPG<br />Budgeted I/S for CPG Segment<br />2011<br />2010<br />2009<br />747<br />707.4<br />674.4<br />Sales Revenue<br />410.85<br />384.9<br />350.5<br />cost of sales<br />126.99<br />117.0<br />95.3<br />other operating expenses<br />0<br />0<br />1.0<br />Restruction expenses<br />2.99<br />3.7<br />4.8<br />Depreciation and Amortization<br />26.89<br />11.0<br />8.8<br />General and Administrative<br />460.4<br />Total cost<br />567.72<br />516.6<br />74.7<br />70.6<br />67.8<br />Income from equity investees<br />253.98<br />261.4<br />281.8<br />operating income<br />
  39. 39. Others<br />2011<br />2010<br />2009<br />211<br />150.8<br />124.2<br />Sales Revenue<br />89.4<br />71.7<br />95<br />cost of sales<br />39<br />34.9<br />31.3<br />other operating expenses<br />0<br />58.1<br />0<br />Restruction expenses<br />45<br />47.4<br />49.8<br />Depreciation and Amortization<br />506.4<br />334.1<br />254.4<br />General and Administrative<br />685.4<br />505.8<br />465.3<br />Total cost<br />-4<br />-3.3<br />0<br />Loss from equity investees<br />-478.4<br />-358.3<br />-341.1<br />operating income<br />Budgeted I/S for Other Segment<br />
  40. 40. Consolidated Income Statement<br />Capital Expenditure<br />Budgeted Balance Sheet<br />Cash Budget<br />
  41. 41. Consolidated I/S<br />
  42. 42. Capital Expenditure<br />(Source: Annual report in fiscal 2010)<br />
  43. 43. Budgeted Balance Sheet<br />
  44. 44. Budgeted Balance Sheet<br />
  45. 45. Budgeted Balance Sheet<br />
  46. 46. Budgeted Cash Budget<br />
  47. 47. Conclusion<br />
  48. 48. Q&A<br />’<br />Thank you!<br />

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