Starbucks Revenues Are High Despite High Costs
Aa
Share
Restaurant companies that have reported quarterly profits in recent weeks have said their U.S. businesses are largely holding up despite economic uncertainty.
Record revenues
Starbucks achieved record revenue in the last quarter. The Seattle-based chain reported sales of $8.71 billion, up 8% from the prior-year period and slightly below analysts' expectations of $8.79 billion. Starbucks said the effects of currency fluctuations had reduced its revenue by about 3%.
For the three months ending January 1, Starbucks reported earnings per share of 75 cents, adjusted for one-time items, below the 77 cents per share expected by analysts surveyed by FactSet. The network reported net income of $855 million, approximately 5% higher than the $816 million generated in the same quarter a year earlier.
Overall global sales at the same stores were up 5% compared to the same quarter a year earlier, while the figure fell 29% in the company's key Chinese market. China's performance was four times worse than expected.
China are the main problem
The sudden lifting of Covid-19 restrictions in China and the resulting spike in cases has hurt Starbucks' business in unexpected ways. Sales in the same stores fell by 42% in December compared to the same month in 2021. The company said it was not yet clear when its operations in China could fully recover.
Starbucks executives said they are watching closely as China reopens after the Covid-19 pandemic and remain committed to investing in the country. Eventually, China will become Starbucks' largest market.
Read next: USD/JPY Pair Is Trading At 128.48 The Aussie Pair Is Above 0.71$| FXMAG.COM
Changes
Starbucks is set to change its popular rewards program later this month, requiring users to accumulate more points to redeem for hot brewed coffee, tea, baked goods or other items. Some customers have criticized the change, but analysts expect it to boost the company's profits this year.
In addition, Starbucks is in the process of changing its CEO. The company's new chief executive, Laxman Narasimhan, joined the company last year and is expected to take the reins on April 1, when Schultz is due to step down.
Narasimhan will inherit a position with a roadmap largely set by Schultz and other Starbucks executives through an ongoing strategic plan, and Schultz will retain a prominent role in the company as a shareholder, board member and cultural custodian.
Schultz and other executives spent months developing a strategy to help Starbucks navigate the future. The plan, which is expected to include changes to store operations and more employee allowances, is expected to run until 2025, Starbucks said.
Schultz said on Thursday that he and Narasimhan are in daily contact and that the future CEO is the right person to take over the company's helm in the coming weeks.
Takeaway sales
Starbucks said last month it was expanding the test with DoorDash Inc., as the Starbucks believes it has more room to increase takeaway sales. The courier company is expected to deliver coffee to the chain's US stores by March.
Starbucks share price
Starbucks said Thursday that the company resumed its share buyback last quarter, buying 1.9 million shares worth $191.4 million. Schultz suspended a share buyback 2021, saying Starbucks needed to reinvest cash in its business.
Starbucks has had to grow faster and redesign its stores to be more relevant to consumers, even if it means sacrificing quarterly profits and shareholder returns in the short term.
Starbucks previously halted its 2020 share buyback after the pandemic hit its business.
Starbucks shares are rising again from November 2022 after starting to fall from January 2022. Currently, Starbucks share price is below 110.00.
Source: wsj.com, finance.yahoo.com
