A Starbucks store is seen contained in the Tom Bradley terminal at LAX airport in Los Angeles, California.
Lucy Nicholson | Reuters
Starbucks on Thursday reported quarterly earnings and revenue that fell wanting analysts’ expectations as weak international demand weighed on its results.
In China, the corporate’s second-largest market, transactions at cafes open at the least 13 months plunged 28%. In the course of the quarter, the Chinese government relaxed its zero Covid policy, which led to recent outbreaks of the virus. Outgoing CEO Howard Schultz said that greater than 1,800 of its 6,090 Chinese locations were closed at the height of the newest Covid wave.
Despite weak performance in China, CFO Rachel Ruggeri reiterated the corporate’s fiscal 2023 outlook. Nonetheless, Starbucks now expects negative same-store sales growth in China through the fiscal second quarter, followed by a reversal of the trend within the second half of the fiscal 12 months.
Shares of the corporate fell greater than 1% in prolonged trading.
Here’s what the corporate reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: 75 cents adjusted vs. 77 cents expected
- Revenue: $8.71 billion vs. $8.78 billion expected
The coffee giant reported fiscal first-quarter net income of $855.2 million, or 74 cents per share, up from $815.9 million, or 69 cents per share, a 12 months earlier.
Excluding restructuring and impairment costs and other items, Starbucks earned 75 cents per share.
Net sales rose 8% to $8.71 billion. Globally, its same-store sales rose 5%, driven by a 7% increase in average transaction spend.
Within the U.S., Starbucks saw same-store sales growth of 10%, because of customers spending more and a 1% bump in traffic. Customers bought a record $3.3 billion in gift cards over the vacation season.
Schultz also said that while many retailers reported falling traffic and weak holiday sales, those with Starbucks locations inside their stores said the coffee chain drew traffic and sales.
Its U.S. rewards program reached 30.4 million energetic members, up 15% from the year-ago period and 6% from the prior quarter. The coffee chain recently modified its loyalty program, making it costlier to redeem points for a home made drink but cheaper for beverages which might be easier to make.
Outside its home market, Starbucks’ same-store sales shrank 13%, dragged down by China’s dismal performance.
But China’s sales are already improving. Ruggeri said the country’s same-store sales plunged 42% in December but just 15% in January.
The corporate opened 459 net recent locations within the quarter.
Trying to 2023, the corporate is projecting revenue growth of 10% to 12% and adjusted earnings per share growth on the low end of 15% to twenty% for fiscal 2023.
Schultz also teased an announcement coming later in February. He said he discovered “an everlasting transformative recent category” when he visited Italy last summer.
“The word I’d use to explain it without giving an excessive amount of away is alchemy,” he told analysts on what’s expected to be his final conference call as chief executive.
Laxman Narasimhan is slated to take over as CEO on April 1.
Read the complete Starbucks earnings report.