Starbucks On Thursday, quarterly earnings and revenue beat analysts’ estimates, fueled by U.S. customers spending more on iced coffee drinks and pumpkin spice lattes.
The Seattle-based coffee company also said US traffic improved in the quarter and nearly rebounded to 2019 levels.
“Despite the high pricing measures taken throughout the year, daily store traffic in the United States reached approximately 95% of pre-pandemic levels in September, fueled by the extremely successful fall promotion,” said Chief Financial Officer Rachel Ruggeri said on the company’s quarterly conference call.
The shares rose 2.7% in after-hours trading.
Here’s what the company reported for the quarter ended Oct. 2 compared to what Wall Street expected, based on a Refinitiv analyst survey:
- Earnings per share: 81 cents adjusted vs. 72 cents expected
- Revenue: $8.41 billion vs. $8.31 billion expected
Net sales for the period rose 3.3% to $8.41 billion. Global same-store sales increased 7%, fueled by increased spending in its home market.
In the US, Starbucks saw same-store sales growth of 11%, driven by people spending more on average and a slight increase in traffic.. Prices were also up 6% from a year ago, but executives said they don’t plan to increase prices at this time.
Cold drinks accounted for more than three-quarters of beverage sales at company-owned American cafes. Starbucks said customers are more likely to add expensive syrups, cold foam and dairy alternatives to cold drinks, driving up their prices.
But customers also still buy hot coffee drinks. Sales of Pumpkin Spice Latte are up 70% from the same period a year ago, according to Starbucks North American President Sara Trilling.
The company’s loyalty program saw active members jump 16% to 28.7 million during the quarter.
In September, the Seattle-based company unveiled a sweeping plan to reinvent its business to meet the changing needs of consumers and employees. Some of these updates will include new equipment to make cold drinks easier.
The ornate artistic decor of the Starbucks coffeehouse chain in Xujiahui district attracts the attention of customers in Shanghai, China, 12 May 2021.
Cost Photo | Barcroft Media | Getty Images
Outside the US, Covid-19 restrictions in China continued to weigh on Starbucks’ international performance. The company’s international same-store sales fell 5%, which was not as steep as the expected 7.1% decline, according to StreetAccount. Same-store sales in China, Starbucks’ second largest market, fell 16% in the quarter.
“We anticipate that the current Covid-related uncertainty will continue,” CEO Howard Schultz said.
For fiscal 2023, Starbucks expects revenue growth of 10% to 12%, despite a 3% decline in foreign currency translation. The company also expects global same-store sales growth to be at the high end of its previous range of 7% to 9%. However, the first fiscal quarter will likely be at the lower end of this range due to lockdowns in China.
Starbucks also said its adjusted earnings per share growth in fiscal 2023 would be in the low end of its previous range of 15% to 20%, citing the costs of its reinvention plan.
Ruggeri also said the company expects commodity headwinds to continue in fiscal 2023, albeit at a lower level than in fiscal 2022.
For its fourth-quarter net income attributable to Starbucks of $878.3 million, or 76 cents per share, from $1.76 billion, or $1.49 per share, a year earlier.
Excluding restructuring and impairment costs, the sale of its Russian joint venture and other items, Starbucks earned 81 cents per share.