Starbucks Corporation’s Financial Analysis

Subject: Company Analysis
Pages: 2
Words: 632
Reading time:
3 min
Study level: College

Business Overview

Starbucks Corporation is a marketer, retailer, and roaster specializing in coffee. The company has operations in over 80 markets across the world. It has more than 32000 licensed and company-operated stores. The company’s operating segments are divided into three: American, international, and channel development. The American segment includes Latin America, Canada, and United States, while the international segment is Japan, China, the Middle East, Asia Pacific, and Africa.

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International and American segments sell complimentary food, coffee, and other beverages, packaged coffees, single-serve coffee products, and a focused selection of merchandise through licensed and company-operated stores (Starbucks, 2021). On the other hand, the channel development segment sells ready-to-drink beverages, tea, and packaged coffee to customers outside licensed and company-operated stores. Starbucks also sells goods and services under different brands such as Starbucks Reserve, Teavana, Princi, Ethos, Evolution Fresh, and Seattle’s Best Coffee.

Starbuck’s main competitors are Dunkin’ Donuts and McDonald’s; the three companies have been fighting for top position as coffee king for many years. Comparing Starbucks with its main competitors in terms of revenue shows that Starbucks generated a revenue of $29.1 billion in the financial year 2021, an increase from $26.5 billion in the financial year 2020, a 9.8% increase. At the same time, Dunkin Donuts’ revenue increased from $1.7 billion in 2020 to $ 2 billion in 2021, representing a 3.7% increase. Finally, McDonald’s revenue increased from $18.86 billion in 2020 to $23.2 billion in 2021, representing a 21% increase. In addition, Starbucks has the highest stock price of $116.24. In the 2021 financial year, Starbucks also returned $20 billion to its shareholders through dividends and share repurchases, which increased from $15billion in 2020 (Starbucks, 2021). Therefore, Starbucks’ revenue growth, stock price, and dividends indicated that I would invest in the corporation because they have tremendous growth.

Starbucks has encountered food-safety issues in china following an undercover media investigation which revealed that expired ingredients were being used. The company had to conduct nationwide self-inspection to all its 5,400 outlets in China to verify this allegation. The inspection unearthed 15 problems, including incomplete disinfection records, some employees were not wearing hats, and wrong placing items in the processing area (Starbucks, 2021). This is an issue that could lead to fines and closure of some outlets because they are not complying with Chinese government standards.

Economic Analysis

Currently, millions of people worldwide thrive on their morning, afternoon, and sometimes evening coffee. This has led to massive consumption in the coffee industry and increased competition for the available consumers. Although coffee has been around for a long time, its competition has recently sprouted, with coffee sales rising by more than 50% for the decade. This prevailing economic climate has led to Starbuck increasing its sales in all its three segments. For instance, in 2021, the company had to increase its prices globally because of increased coffee and other ingredients costs (Starbucks, 2021). Although the company increased its merits, it recorded an increase in sales that led to gross profit from $15,823 million in 2020 to $20,322 million in 2021.

The tremendous growth of the coffee industry has led to financial stability in Starbucks Corporation. The corporation can efficiently allocate resources, evaluate and manage financial risks, and maintain employment as required by the economy’s natural rate (Starbucks, 2021). In addition, the prevailing economic climate has affected current economic development because the company has increased the number of brands it is working with within the channel development segment. The general economic climate has also affected its projected economic development since it has led to the company project increase in returns to its shareholders. Therefore, financial stability, increasing working brands, and project increase in shareholder returns will make me loan the company. This indicates that the company is not at risk of getting bankrupt.

Reference

Starbucks. (2021). 2021 10-K form. Web.

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