Tuesday, September 11, 2012

Starbucks: Accounting Shell Game Hides Unprofitable Stores Overseas

A big part of the growth story at Starbucks (SBUX) relates to international expansion, especially in China. Yet, there’s strong evidence that the company is losing money at its company-owned stores overseas.

We’ve consistently questioned whether the company’s international company-owned stores make money. In the International Division, if we exclude Licensing Revenue and Equity Investee Income and adjust G&A Expense 50% lower, one could conclude that SBUX’s international company-owned locations lose money on an accounting basis (note: we’re not referring to cash flow that would add-back non-cash expenses).

It’s interesting that the company is touting their international store growth potential today when their international stores appear to lose money.

You be the judge.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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