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, rounded) Prior Year  (in millions, rounded) Americas $13,293 $11,980 EMEA*1,217 1,295 China/Asia Pacific 2,396 1,130 Channel Development** 1,731 1,546 Other526 497 Total$19,163 $16,448 *Europe, Middle East, and Africa **Sells packaged coffee and teas globally

a. Prepare a horizontal analysis of the segment data using the prior year as the base year. Round whole percents to one decimal place.

b. Prepare a vertical analysis of the segment data. Round whole percents to one decimal place.

c. What conclusions can be drawn from your analyses?

Answer:

a. Horizontal analysis:

Amount Percent

Americas $13,293 $11,980 $1,313 11.0%

EMEA 1,217           1,295 (78) –6.0%

China/Asia Pacific 2,396           1,130           1,266 112.0%

Channel Development 1,731           1,546           185 12.0%

Other526              497              29 5.8%

Total revenues $19,163 $16,448 $2,715 16.5%

b. Vertical analysis:

Amount Percent Amount Percent

Americas $13,293 69.4% $11,980 72.8%

EMEA 1,217           6.4% 1,295 7.9%

China/Asia Pacific 2,396           12.5% 1,130           6.9%

Channel Development 1,731           9.0% 1,546           9.4%

Other526              2.7% 497              3.0%

Total revenues $19,163 100.0% $16,448 100.0%

c. The horizontal analysis indicates that the total revenues of Starbucks increased by more than 16% (16.5%) from the prior year to the recent year. This increase is explained by continued consumer preference for Starbucks coffee and aggressive Asian expansion. Revenues increased by 112% in China/Asia Pacific versus 11% in the Americas. This was a noticeable difference in growth. Apparently, there are more store openings in China/Asia Pacific than in the Americas. EMEA actually declined slightly (−6%) between the two years, indicating a maturing market. The vertical analysis indicates that the percent of Americas’ revenues to total revenues decreased from 72.8% in the prior year to 69.4% in the recent year. In this same period, the percent of China/Asia Pacific to total revenues increased from 6.9% in the prior year to 12.5% in the recent year. This again confirms significant growth in China. Channel Development grew by 12% and nearly maintained its percent of total revenues between the two years. Both analyses indicate that China/Asia Pacific has been the primary engine for Starbucks’ growth.