An worker hands a bag to a customer on the drive-thru of a Starbucks coffee shop in Hercules, California, on Thursday, July 28, 2022.
David Paul Morris | Bloomberg | Getty Images
Starbucks on Tuesday reported better-than-expected quarterly earnings and revenue, fueled by demand within the U.S. for its cold coffee drinks.
As inflation surges, interim CEO Howard Schultz said the chain shouldn’t be seeing customers trade down or reduce their spending. Other restaurant firms, including McDonald’s and Chipotle Mexican Grill, have seen low-income consumers visit less steadily or spend less as higher gas and grocery bills squeeze their budgets. Schultz credited Starbucks’ pricing power and customer loyalty for its ability to buck the trend.
Shares of the corporate rose greater than 1% in prolonged trading.
Here’s what the corporate reported for the quarter ended July 3 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: 84 cents adjusted vs. 75 cents expected
- Revenue: $8.15 billion vs. $8.11 billion expected
The coffee giant reported fiscal third-quarter net income attributable to Starbucks of $912.9 million, or 79 cents per share, down from $1.15 billion, or 97 cents per share, a yr earlier. The corporate said that inflation and better wages for baristas weighed on its margins this quarter.
Net sales rose 9% to $8.15 billion. The corporate reported global same-store sales growth of three%, fueled by a stronger performance in the US.
In Starbucks’ home market, same-store sales increased 9%, driven largely by higher average order totals, in addition to a 1% uptick in traffic. Morning sales are returning, the corporate said, making up roughly half of revenue as consumers resume pre-pandemic routines.
The corporate also noted the recognition of its iced shaken espresso and said cold beverages accounted for 3 quarters of U.S. sales this quarter. Schultz said customers usually tend to add modifiers like syrups and milks to cold drinks than hot drinks, raising the value of the general beverage. Cold drinks are also popular with Gen Z customers, a key demographic for the coffee chain, in response to Schultz.
Outside the U.S., same-store sales fell 18%, weighed down by plummeting demand in China. Starbucks said Covid restrictions affected sales in its second-largest marketplace for two-thirds of the quarter. Consequently, China’s same-store sales plunged 44%. The corporate continues to be seeing periodic short-term closures in China.
Last quarter, Starbucks pulled its outlook for fiscal 2022, citing the uncertainty attributable to Covid outbreaks in China. The corporate didn’t issue a recent forecast this quarter.
Starbucks opened 318 net recent locations worldwide through the quarter, bringing its global restaurant count to 34,948.
The corporate plans to carry an investor day on Sept. 13 in Seattle to share more about its strategy for the long run.
Correction: An earlier version of this story misstated Refinitiv estimates for Starbucks’ quarterly revenue.