Starbucks Gross Margin Analysis
Gross margin is calculated by subtracting cost of goods sold from total sales divided by sales. The result, a percentage, is the amount a company is able to retain after incurring direct costs of production. Coffee retailer, Starbucks, has seen a steady rise in its gross margin over the last five fiscal years, from 56.29% in 2012 to 60.07% at the end of fiscal year 2016; rising roughly 1% each year, as seen in the chart below:
Date Revenue (In millions) (Cost of Goods Sold) Result
September 30, 2012 13299.5 5813.3 56.29% 13299.5 September 29, 2013 14892.2 6382.3 57.14% 14892.2 September 28, 2014 16447.8 6858.8 58.30% 16447.8 September 27, 2015 19162.7 7787.5 59.36% 19162.7 October 2, 2016 21315.9 8511.1 60.07% …show more content…
It’s current ratio, the measure of dollars available to pay each dollar of current liabilities maintained as stead 1 – 1 ratio for the 2015/2016 fiscal periods. Likewise, its ability to pay off short-term obligations without selling inventory maintained at .73 and .74, respectively. Their ability to use cash and marketable securities to pay short-term obligations, known as cash ratio, was .44 and .50 at the close of the last two fiscal periods. According to Butler Consultants, the gross margin for food service companies is 62.3%. Starbuck’s gross margin for fiscal years ending 2015 and 2016 were close to industry average: 59.36% and 60.07%, respectively, with an increase in their gross margin of 1.20% for the two years. Operating profit margin remained steady at approximately 20%. Starbucks also saw a decrease in return on assets between the two fiscal years of 2.55%, but an increase in return on equity of .50% thus resulting in increased financial leverage with financial institutions: DuPont analysis was made famous by the DuPont corporation; it uses both the balance sheet and the income statement to separate ROA and ROE into components. Breaking it down in this manner reports that return on equity was 2.52 times in 2015 and 2.95 times in 2016 meaning that $2.52 was earned per dollar of common stockholder investments with Starbucks:
Return on Equity Profit Margin x Total Asset Turnover x Equity Multiplier
Date Revenue (In millions) (Cost of Goods Sold) Result
September 30, 2012 13299.5 5813.3 56.29% 13299.5 September 29, 2013 14892.2 6382.3 57.14% 14892.2 September 28, 2014 16447.8 6858.8 58.30% 16447.8 September 27, 2015 19162.7 7787.5 59.36% 19162.7 October 2, 2016 21315.9 8511.1 60.07% …show more content…
It’s current ratio, the measure of dollars available to pay each dollar of current liabilities maintained as stead 1 – 1 ratio for the 2015/2016 fiscal periods. Likewise, its ability to pay off short-term obligations without selling inventory maintained at .73 and .74, respectively. Their ability to use cash and marketable securities to pay short-term obligations, known as cash ratio, was .44 and .50 at the close of the last two fiscal periods. According to Butler Consultants, the gross margin for food service companies is 62.3%. Starbuck’s gross margin for fiscal years ending 2015 and 2016 were close to industry average: 59.36% and 60.07%, respectively, with an increase in their gross margin of 1.20% for the two years. Operating profit margin remained steady at approximately 20%. Starbucks also saw a decrease in return on assets between the two fiscal years of 2.55%, but an increase in return on equity of .50% thus resulting in increased financial leverage with financial institutions: DuPont analysis was made famous by the DuPont corporation; it uses both the balance sheet and the income statement to separate ROA and ROE into components. Breaking it down in this manner reports that return on equity was 2.52 times in 2015 and 2.95 times in 2016 meaning that $2.52 was earned per dollar of common stockholder investments with Starbucks:
Return on Equity Profit Margin x Total Asset Turnover x Equity Multiplier