Starbucks Corporation (SBUX
Q3 2009 Earnings Call Transcript
July 21, 2009 5:00 p.m. ET
JoAnn DeGrande - Director, Investor Relations
Howard Schultz - Chairman of the Board, President, & Chief Executive Officer
Troy Alstead - Chief Financial Officer, Executive Vice President, & Chief Administrative Officer
Clifford Burrows - President, Starbucks Coffee US
John Ivankoe – JPMorgan
Jeffrey Bernstein - Barclays Capital
Matthew DiFrisco – Oppenheimer & Company
Joseph Buckley - Bank of America/Merrill Lynch
David Tarantino - Robert W. Baird & Co.
Larry Miller - RBC Capital Markets
Sharon Zackfia - William Blair & Co.
Thomas Forte - Telsey Advisory Group
John Glass - Morgan Stanley & Co.
David Palmer - UBS
Steven Kron - Goldman Sachs
Good afternoon. My name is Cara and I will be your conference operator today. At this time, I would like to welcome everyone to Starbucks Coffee Company’s third quarter fiscal 2009 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Please limit your questions to one per person to ensure that management has adequate time to answer everyone’s question. Thank you.
Ms. DeGrande, you may begin your conference.
Thank you. Good afternoon, ladies and gentlemen. This is JoAnn DeGrande, Director of Investor Relations at Starbucks Coffee Company. With me here today in Seattle is Troy Alstead, CFO; and joining us from New York are Howard Schultz, Chairman, President and CEO; and Cliff Burrows, President of our U.S. business. Cliff will participate in Q&A, which will follow today’s prepared remarks.
Before we get started, let me remind you that this conference call will contain forward-looking statements. Forward-looking statements are subject to various risks and uncertainties that could cause our actual results to differ materially from these statements and should be considered in conjunction with cautionary statements and risk factor discussions and our filings with the SEC, including our last Annual Report on Form 10-K and subsequent reports on Form 10-Q.
Starbucks assumes no obligation to update any of these forward-looking statements or information. Please refer to the Investor Relations section of Starbucks’ website at starbucks.com to find disclosures and reconciliations of non-GAAP financial measures mentioned on today’s call, along with their corresponding GAAP measures.
Now, let me turn the call over to Howard Schulz. Howard.
Thank you, JoAnn and good afternoon, everyone. Over the past 16 months, Starbucks has faced both the headwind of the global economy, just as all businesses have, and our own unique set of challenges. Today, I am pleased to report results for the third quarter that point to positive momentum from the comprehensive set of actions we’ve taken to transform the business.
Now at the outset, let me say that a lot of hard work still lies ahead. One quarter does not make a trend but I speak with you today with a sense of confidence based on results, results that give us tangible evidence that our transformation initiatives are beginning to be reflected in our financial and operating performance.
Today I will take you through the business highlights for the quarter and make a few remarks on the operating environment and trends that we are observing. Then I will turn it over to Troy who will review the financial results in depth.
Let me touch on a few highlights of the quarter to frame my comments today. First of all, comparable store sales came in at a negative 5%. This was a sequential quarter improvement from negative 8% in the second quarter of ’09. We saw comp sales improve steadily month by month within the quarter.
In terms of EPS, we are reporting a $0.20 profit on a GAAP basis versus a loss of $0.01 in Q308. Non-GAAP EPS came in at $0.24 versus $0.16, up 50% year over year. Non-GAAP operating margin improved to 10.6% versus 6.9% in Q308 and we saw non-GAAP U.S. operating margins improve to 13.4% from 8.8% in Q308.
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