Starbucks' (NASDAQ:SBUX) string of growth remains unbroken. For those curious about the details, the second-quarter results are in the Fool by Numbers piece that I wrote earlier today.
Overall, the results were very good, even by Starbucks' standards, though I would caution investors against getting too excited about the free cash flow growth in the first half of the year. I expect that Starbucks will have strong growth in free cash flow by the end of the year, but not the 74% that we've seen in the first half. This is largely because the majority of the company's capital expenditure budget for the year -- $750 million to $775 million -- remains unspent, and I expect that it will be consumed in the final two quarters.
Another item to note is Starbucks' weighted average diluted share count, which decreased 4% versus last year at this time. This is due to the large share repurchase that the company made back in August. Had the share repurchases not been made, Starbucks would have more cash on its balance sheet, and earnings might have only come in at $0.15 per share, which still would have been impressive. But make no mistake -- the share repurchase was a good move for shareholders, because at the time Starbucks had plenty of cash available to support its store-opening goals and working capital needs, and its shares were at a reasonable valuation, given the company's growth.
The company addressed a number of items on its conference call last night. Among them were the company's ongoing entertainment initiatives in music, movies, and now a book. Starbucks also specifically discussed the performance of Akeelah and the Bee, a film on which the company has partnered with Lions Gate Entertainment (NYSE:LGF). It's important not to lose sight of the fact that Starbucks did not invest directly in the making of the film and stands to benefit only if the film does well. From my perspective as a Starbucks investor, I see this as a relatively low-risk venture, with potential rewards thanks to the effort the company expended promoting the movie in its stores.
The other item from the call that I found most interesting is that CFO Michael Casey will be stepping down. The company is beginning its search for a replacement, and Starbucks stated that it will look internally and externally at candidates. Casey plans to remain at Starbucks to ensure a smooth transition -- similar to the CEO transition from Orin Smith to Jim Donald -- and to continue working on some of his other operational responsibilities after the transition is complete.
On a related note, I was offered the opportunity to speak to Casey after last night's earnings call and gladly accepted. I asked Casey about his upcoming change in roles, a few questions about the long-term potential of Starbucks internationally, and how Starbucks looks at the uses for its rapidly growing cash flow. I hope to have my notes from our discussion written up in a readable format for everyone by next week.
For related Foolishness:
- Starbucks Puts Its Cash to Work
- Starbucks' Sales Perk Up: Fool by Numbers
- A Foolish Baby Shower: Starbucks
Starbucks is a Motley Fool Stock Advisor selection. Brew yourself up a helping of Tom and David Gardner's newsletter service -- it's on the house, for 30 days.
Nathan Parmelee owns shares in Starbucks but has no financial interest in any other companies mentioned. The Motley Fool has an ironclad disclosure policy.
