MILAN – Starbucks reported Tuesday better-than-expected second-quarter results, driven by its performance in North America and sharp recovery in China, but the company said that sales growth could moderate as the year progresses. Starbucks announced EPS of $0.74 on revenue of $8.7 billion for the January-March period, up 14%. Analysts anticipated EPS of $0.65 cents on revenue of $8.4 billion.
Comparable store sales increased 11%, underpinned by a 6% increase in comparable transactions and a 4% increase in the average ticket.
In North America, same-store sales climbed 12 percent, and the company reported more store visits as well as higher spending per visit. For the full year, Starbucks expects North American same-store sales increases in the 7-9 percent range, said Starbucks Chief Financial Officer Rachel Ruggeri.
Same-store sales in China were up 3 percent, reversing a 29 percent decline the company saw in its October-December period due to a spike in Covid infections. It was the first time Starbucks had seen positive same-store sales in China since 2021.
The coffee giant said it opened 464 net new stores during the quarter, including 100 in North America. As part of a larger plan to reinvigorate sales, Starbucks has been closing underperforming locations and replacing them with stores in higher-traffic areas or smaller stores that are focused on pickup or drive-thru business.
But, despite the positive results, Starbucks reiterated its original outlook for the year, and CFO Rachel Ruggeri warned that its annual earnings per share growth in the current quarter would “be meaningfully lower than our fiscal year guidance range of 15% to 20%.” As a results, Starbucks (SBUX) shares shares fell about 6% in after-hours trading.
“There is more work to do to tailor our stores on the demand that we see, advance our technology, enhance how we innovate our equipment and also more fundamentally, how we get back to focusing on fundamental operations and executing better,” the new Starbucks CEO, Laxman Narasimhan, said his first earnings call.
Narasimhan said the company also continues to introduce new equipment — like hand-held cold foamers — to improve execution and speed. But he also pointed out that Starbucks must do a better job simplifying its supplies and operations; he noted, for example, that the company currently has 1,500 cup and lid combinations around the world.
“Our performance is strong, but our health could be stronger,” he said. “There is more work to do in our stores for the demand that we see.”
Starbucks: Q2 Fiscal 2023 Highlights
- Global comparable store sales increased 11%, primarily driven by a 6% increase in comparable transactions and 4% increase in average ticket
- North America comparable store sales increased 12%, driven by a 6% increase in comparable transactions and a 5% increase in average ticket; U.S. comparable store sales increased 12%, driven by a 6% increase in comparable transactions and a 6% increase in average ticket
- International comparable store sales increased 7%, driven by a 7% increase in comparable transactions; China comparable store sales increased 3%, driven by a 4% increase in comparable transactions and a 1% decline in average ticket
- The company opened 464 net new stores in Q2, inclusive of closures across North America and International as part of ongoing efforts to strengthen the portfolio, ending the period with 36,634 stores globally: 51% company-operated and 49% licensed
- At the end of Q2, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,044 and 6,243 stores in the U.S. and China, respectively
- Consolidated net revenues up 14% to $8.7 billion, inclusive of approximately 2% unfavorable impact from foreign currency translation
- GAAP operating margin of 15.2% increased from 12.4% in the prior year, primarily driven by sales leverage, pricing, productivity improvement and gain on the sale of Seattle’s Best Coffee brand. This expansion was partially offset by previously committed investments in labor, including enhanced store partner wages and benefits, increased general and administrative costs related to our Reinvention Plan as well as inflationary pressures.
- Non-GAAP operating margin of 14.3% increased from 13.0% in the prior year
- GAAP earnings per share of $0.79 grew 36% over prior year
- Non-GAAP earnings per share of $0.74 grew 25% over prior year
- Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 30.8 million, up 15% year-over-year.
