Starbucks stock falls as earnings weighed down by China sales miss estimates

Since 2020, our Starbucks China team has been navigating the most acute COVID-related mobility restrictions and disruptions anywhere in the world, while at the same time, developing the flexibility to execute under any COVID scenario. The coffee chain was expected to post quarterly earnings per share of 77 cents and revenue of $8.78 billion. For their last quarter, Starbucks reported earnings of $0.75 per share, missing the Zacks Consensus Estimate of $0.77 per share. This reflects a negative earnings surprise of 2.60%.

Historical and current end-of-day data provided by FACTSET. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements. So from a brand standpoint, we’re in a very strong position. When we look at resilience, last quarter, we saw not only ticket growth but transaction growth, even in the face of the macroeconomic headwinds.

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Once again, these markets together achieved double-digit comp growth, driven primarily by transactions. Their revenue grew 25% in the quarter when excluding a 17% unfavorable impact of foreign currency translation with successful holiday campaigns across all regions. Operating margins for the International segment was 14.3% in Q1, down 400 basis points from the prior year, mainly driven by deleverage in China, but partially offset by strong sales leverage across other global markets and the resulting business mix. The segment delivered revenue of $1.7 billion in Q1, down 10% from the prior year or up 2% when excluding a nearly 13% unfavorable impact from foreign currency translation.

Our convenience channels, Mobile Order & Pay, drive-through, and delivery continue to fuel our business, delivering 72% of U.S. Analysts will also be looking for updates on the earnings call for changes to Starbucks’ reward program, which go into effect February 13. While consumers are unhappy about the change, which makes it more expensive to reach the amount of stars needed for freebies, Wall Street is eager to hear about potential opportunities for higher margins from the change.

Also, we had strong North American coffee partnership performance in the quarter. Our data continues to show that we are the employer of choice in retail at top tier, including the 100 percentile relative to benefits. And finally, we see lots of opportunities to continue to make Starbucks the best job in retail. And we have a very robust master plan as part of the reinvention agenda to make sure we can deliver on that brand promise to our partners in the same way we do with our customers. I know you guys indicated tonight that there was some staffing challenges with the surge in COVID.

Starbucks (SBUX) Stock Up 25% in a Year: More Room to Run?

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Outgoing CEO Howard Schultz said that more than 1,800 of its 6,090 Chinese locations were closed at the peak of the latest Covid wave. As of Q1 2023, Starbucks’s revenue has grown 8.41% year over year. This is 0.85 percentage points higher than the US Restaurants industry revenue growth rate of 7.55%. Starbucks’s revenue in the past year totalled $32.91 billion. As of Q1 2023, Starbucks’s earnings has grown -22.46% year over year. This is 29.98 percentage points lower than the US Restaurants industry earnings growth rate of 7.53%.

SBUX past earnings growth

Starbucks executives have said that they are closely watching how China reopens from the Covid-19 pandemic and that they remain committed to investing in the country. Eventually, China will become Starbucks’s largest market, Mr. Schultz said in a company message last month. SBUX 1.10%said Thursday it generated record revenue during its last quarter, though higher costs ate into its profit. Starbucks reported sales of $8.71 billion in the quarter.

When excluding China and the impact from foreign currency translation, revenues in all three of our reporting segments continued to expand double digit, demonstrating the demand of our diverse portfolio and power of our innovation as we focus on our new era of growth. Q1 consolidated operating margin contracted 60 basis points from the prior year to 14.5%, primarily driven by investments in growth in labor, part of which represent the reinvention plan, inflation, and deleverage in China. The significant strength across our global portfolio, however, largely offset the impacts from China’s performance, keeping us on track to achieve our fiscal 2023 growth targets, as I’ll discuss in a moment. For the full year 2023, Starbucks expects its U.S. comparable sales to grow by as much as 9%.

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In summary, here are key takeaways for my discussion today. In January, China’s comparable sales growth was a decline of approximately 15%, which was an improvement from a decline of 42% in December. While we’re seeing early positive signs of momentum rebuilding, headwinds related to COVID still exist in the market and are expected to impact the full Q2. As a result, we anticipate the negative impact on the operating income in Q2 to be comparable to or greater than Q1. The contraction was partially offset by pricing in North America and sales leverage across markets outside of China. The deleverage in China was more significant than expected, while other margin drivers were largely in line with our original guidance.

Revenue was 8% higher than the $8.05 billion the company reported in the year-ago quarter. In the U.S. and North America, same-store sales rose 10% year over year, mostly driven by price increases — a 9% rise in average ticket, or the amount spent by each customer who visits, while comparable transactions increased 1%. Net revenues for the North America segment increased 14% year over year to $6.6 billion, contributing to what the company said was record revenue of $8.71 billion, which fell shy of analysts’ expectation of $8.79 billion. And so what we’re seeing now with this 25% growth is growth over growth and performance over performance. And we were also expecting in some markets to see the economy inflation slow demand and it hasn’t.

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So our strong operating muscle and the strong relationships that we have with our customers and our partners and the strength of our brand, really, we are best positioned and so ready to recover and accelerate the growth https://day-trading.info/ of our business. So excluding China, we had tremendous growth across our markets, which really speaks to the diversity of the depth and diversity of our portfolio. We also had tremendous growth in our channels business.

In response to your question around traffic, our 10% comp, as you know, was largely driven by ticket. Our transactions, transactions per store per day, which is how we measure the health of our business are still below pre-COVID levels and actually slightly below prior year. I think we all recognize halifax community college student reviews, scholarships, and details that the sales are well above pre-COVID levels in total. But clearly, the average check has been the driver of that. I’m just wondering if you can — how you get comfortable with the fact that the brand is as strong as ever, whether you’re able to look at the number of beverages sold.

Current guidelines limit users to a total of no more than 10 requests per second, regardless of the number of machines used to submit requests. What if you’re looking for a more balanced portfolio instead? Our high-quality portfolio and multi-strategy portfolio have beaten the market consistently since the end of 2016. “There’s much more opportunity and much more work ahead,” said Mr. Schultz. He said Thursday’s presentation was his 108th and last Starbucks earnings call.

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With that said, things do appear to be turning around for the coffee chain globally – as this figure is quite the improvement over the last quarter which saw a 44% decrease in revenue throughout the China segment. And, other international companies picked up the slack for China – resulting in overall international comp sales rising 7%. Starbucks Corp. is a roaster and retailer of specialty coffee globally. Besides its fresh, rich-brewed coffees, the company’s offerings include many complimentary food items and a selection of premium teas and other beverages, sold mainly through the company’s retail stores.

This is a core part of our reinvention, and we accelerated our reinvention investments in the quarter, driving continued improvement in our industry-leading partner retention. We’re also committed to elevating the customer experience. And within the quarter, we launched our first Starbucks rewards Reward Together partnership with Delta Airlines, which offers members of both Delta SkyMiles and Starbucks Rewards, new ways to earn rewards. Our product portfolio and innovations continue to resonate with customers, especially our cold, customized beverage innovation.

• The important question here is can the brand continue to expand since it is already ubiquitous?
• This reflects an improvement of approximately one percentage point on both revenue and earnings growth relative to our previous expectations.
• Said another way, during the holiday season, Starbucks truly becomes the currency of kindness and it drives our business.
• We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes.

Starbucks last released its quarterly earnings data on February 2nd, 2023. The coffee company reported $0.75 earnings per share for the quarter, missing analysts’ consensus estimates of $0.77 by $0.02. The business had revenue of $8.71 billion for the quarter, compared to analyst estimates of $8.78 billion. Its revenue for the quarter was up 8.2% compared to the same quarter last year. Starbucks has generated $2.87 earnings per share over the last year ($2.87 diluted earnings per share) and currently has a price-to-earnings ratio of 35.0.

It also anticipates that its sales in China will rebound as the country eases its Covid restrictions. Additionally, Starbucks intends to expand its global store count by roughly 7%, fueled by growth in its international markets. All told, the company forecast its revenue to increase by 10% to 12% in FY 2023, despite an expected three-percentage-point hit from foreign exchange movements. The company believes this sales growth, coupled with anticipated margin expansion, will drive its earnings per share higher by 15% to 20% in FY 2023. This reflects an improvement of approximately one percentage point on both revenue and earnings growth relative to our previous expectations.

We just have pattern recognition for many other markets. And also, Belinda has shared with us, and we’ve seen the numbers of what’s happened to the run-up and during Chinese New Year, which was quite robust. And so I think, John, I think we’re going to be very careful, very sensitive.

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Starbucks ended the quarter with 36,170 stores after opening 459 net new stores in the quarter, according to its earnings report. Overall global same-store sales increased 5% compared with the same quarter a year earlier, while that metric fell 29% in the company’s key China market. China’s results were four times worse than anticipated, the company said. From a top-line perspective, we had 15% growth that was driven by global our Coffee Alliance, our at-home coffee, where we maintained the No. 1 share. But there was some pricing in that, and we think that’s going to moderate through the course of the year.