Starbucks Corp (SBUX.O) has reported quarterly profits that surpassed Wall Street estimates due to the recovery of its business in China. However, the coffee giant’s shares fell approximately 6% in after-hours trading as it didn’t raise its 2023 guidance. Starbucks’ earnings were powered by a sharp rebound in business in China, where most of the COVID-19 restrictions have now been lifted, leading to a surge in consumer mobility and spending in the region during March.
Starbucks’ global comparable sales jumped 11%, outperforming analysts’ expectation of a 7.36% rise. The company’s customers visited more frequently and spent more per trip, leading to higher earnings. Excluding one-time items, Starbucks earned 74 cents per share, beating estimates of 65 cents.
The company posted a 3% rise in comparable sales in China in the second quarter ended April 2, surpassing analysts’ expectations and helping to boost international sales by 7%, which was more than double the average analyst’s estimate of 2.94%, according to Refinitiv data. Although the recovery in China was better than expected, the growth in average weekly sales is expected to slow down in the second half of the year. Rachel Ruggeri, the Chief Financial Officer of Starbucks, said during an earnings call that there is uncertainty about consumer behavior and international travel, which could impact the company’s sales in China.
Starbucks’ CFO also said that the company’s growth in China is expected to moderate, and while it reaffirmed its 2023 guidance, it didn’t raise it, citing an uncertain global environment. According to Twitter’s inactive account policy, accounts may be permanently removed due to prolonged inactivity.
Starbucks has doubled down on its cold and customizable beverages, boosting traffic in the U.S. and driving a 12% jump in comparable store sales in its North American market. The chain is also adding customers to its rewards program, which now has 30.8 million active members in the United States, up 15% over this time last year, according to its earnings release. Moreover, it is building more cafes, adding 100 net new stores in North America and more than 360 internationally.
Starbucks’ investors may have taken profits after its stock jumped 16% in the past five weeks ahead of the earnings report, according to Edward Jones analyst Brian Yarbrough. Starbucks’ customers are typically younger, wealthier, and relatively unfazed by inflation. The company has been successful in retaining its customers by expanding its rewards program, which offers personalized offers, games, and exclusive content, creating a sense of loyalty among its customers.
Overall, Starbucks has managed to maintain its position as the world’s largest coffeehouse chain with its strong recovery in China and North America. However, the uncertain global environment has impacted the company’s outlook, and it remains to be seen how it navigates these challenges in the coming months.