How to Interpret Financial Reports

Starbucks has established themselves as the giant in the gourmet yet quickly served coffee industry. Sure, there are other competitors nipping at their proverbial heels like Dunkin Donuts, Caribou and Seattle's Best (at least until Starbucks bought them out) but Starbucks is national and ubiquitous on a level that these other more regional and/or smaller outfits can only dream of.

Not only do they have a lockdown on the store-based market but they are also branching out into the home market by selling conventional coffee beans, K-Cups for the Keurig single-serve coffee makers and they also have started their own line of machines on top of that. While Starbucks should dare not be complacent or fail to look forward to the future, their current fortunes and progress are quite good and are unlikely to change in at least the near future due to aggressive expansion plans and good practices.

Analysis The highlights on the start of the report show some very good data points. Total net revenues were up in double digit percentage points clocking in at twelve percent even which comes to a grand total of nearly $15 billion USD for fiscal 2013. Global sales also went up sharply by a total of seven percent between the increases in overall transactions and the average overall transaction sale amount. In other words, people are visiting more but they are also spending more per visit.

However, operating income dipped but it was attributed to a litigation cost relating to a legal fracas with Kraft Foods. Cash flow shot up nearly a billion and capital expenditures also grew by nearly double from $856 million to $1.26 billion. The result of operations shows that the vast majority, but certainly not all, of Starbucks' revenue comes from company-operated stores rather than franchisee locations and the like.

However, they do have some licensed store and some other operations centering around food service and so forth and each of those two had roughly ten percent each of Starbucks' overall revenue. The company-operated stores picked up the other eighty percent or so. Operating expenses also shows some good growth as there was a sharp increase in the cost of goods sold due to the increasing sales but the percentage of revenue spent actually edged down nearly a full percent. Much the same held true for store operating expenses.

However, there were very slight increases in depreciation and general/admin charges. The Kraft-related charge was a huge drag on the totals as it cost the company a $2.8 billion charge. Conclusion Starbucks certainly has risks and challenges that they need to watch out for. Certainly, they have had a penchant for becoming too prolific in a given area so that the stores cannibalize each other's sales. The issue with Kraft was also a.