Question

in a one or two page paper summarize the MD&A for SBUX and critique it based on the SEC plain writing concepts.

Answer 1

SBUX’s (Starbucks) MD&A (management discussion and analysis) in the latest annual report i.e. 2018 annual report provides a comprehensive portrayal of the company’s performance. The company has utilized appropriately both qualitative as well as quantitative measures to throw light on the performance of the company. The MD&A section of SBUX’s 2018 annual report (and also annual reports of earlier years) through a clear as well as a detailed light on the company’s financial statements, its systems and controls that are in place, its compliance with laws and regulations, and the required as well as the necessary action that it has planned or future (as well as actions that it had taken in the past) to systematically and tangibly address the challenges that the company faces. The MD&A section of SBUX also throw light on future goals of the company.

The MD&A section of the company starts by providing financial highlights for 2018. Key bullet points highlights the prominent points like increase in net revenue, global comparable store sales growth, changes in operating income, restructuring and impairment charges, capital expenditure (capex), and share repurchases and dividends. The MD&A section then goes on to provide a comprehensive overview of the company’s performance. It talks about the restructuring and streamlining efforts of the company, strategic focus on high growth business and divesting non-core business, new business developments like agreement with Nestle to sell and market products of Starbucks. The section also talks about the change in reportable operating segments and that keeping this in mind the company has revised its prior period financial numbers.

The section goes on to talk about acquisitions and how these acquisitions combined with new joint ventures will fuel its growth in future. The next aspect of the section is a comprehensive quantitative analysis of the financial performance for the fiscal year and then is followed by outlook for the next year. This outlook section is amply supported by qualitative points as well. The result of operations are shown and different tables are provided for revenues, operating expenses, other income and expenses, result of operations in a segment wise manner (like Americas, China/Asia Pacific, EMEA). The section end with a detailed analysis of different risks that the company is exposed to and what steps the company has taken to minimize the impact of those risks.

Based on SEC’s plain writing concepts we can say that MD&A of SBUX is a good analysis. SBUX, through its MD&A section, has been able to create clear and informative disclosure section in its annual report. SBUX has kept in mind that many users of the company’s financial reports are not accountants or lawyers or investment professionals and as such it has kept the language plain and simple in major part of the analysis. The analysis is largely devoid of technical jargons and so a large part of the analysis can be understood easily by a common man as well. Also no redundant information is provided and the flow of information is coherent. Defined terms are also used sparingly and jargons and defined terms are used only when absolutely necessary. Most of jargons and legalese have been replaced with short common words and this is a very good aspect. In terms of drawbacks the MD&A section often uses long sentences and while the subject, verb and object are kept close together use of long sentences often tend to confuse the readers in this case. Nevertheless SBUX has done a very good job and has adhered to most of the provisions of SEC’s plain writing concepts in its MD&A section.