Starbucks Corporation reported the following geographical segment revenues for a recent and a prior fiscal year.

Starbucks Corporation reported the following geographical segment revenues for a recent and a prior fiscal year.


Recent Year
(in millions)
Prior Year
(in millions)
United States $ 7,560 $7,061
International 2,289 1,914
Global consumer products 707 674
Total revenues $10,556 $9,649


a. Prepare a horizontal analysis of the segment data using the prior year as the base year.

b. Prepare a vertical analysis of the segment data.

c. What conclusions can be drawn from your analyses?


Answer:

a. Horizontal analysis:
Recent Year
(in millions)
Prior Year
(in millions)
Increase/(Decrease)
Amount Percent
United States $ 7,560 $7,061 $499 7.1%
International 2,289 1,914 375 19.6%
Global consumer products 707 674 33 4.9%
Total revenues $10,556 $9,649 $907 9.4%
b. Vertical analysis:
Recent Year Prior Year
Amount Percent Amount Percent
United States $ 7,560 71.6% $7,061 73.2%
International 2,289 21.7% 1,914 19.8%
Global consumer products 707 6.7% 674 7.0%
Total revenues $10,556 100.0% $9,649 100.0%



c. The horizontal analysis indicates that the total revenues of Starbucks increased by over 9% (9.4%) from the prior year to the recent year. This increase is explained by improvements in consumer confidence experienced during this time. Starbucks was positively impacted because its product is both premium priced and discretionary. Thus, as economic times improved, consumers increased consumption and/or chose more expensive options. Revenues increased by 19.6% internationally, versus 7.1% in the United States. Higher international growth may be the result of more store openings internationally, than in the United States. Global consumer products (segment that sells Starbucks-licensed products) had the lowest growth between the two years. The vertical analysis indicates that the percent of U.S. revenues to total revenues decreased from 73.2% in the prior year to 71.6% in the recent year. In this same period, the percent of international revenues to total revenues increased from 19.8% in the prior year to 21.7% in the recent year. Both analyses indicate that Starbucks’ international operations grew more than did the U.S. operations during the two-year period.