- Q1 sales and earnings miss analysts’ estimates
- China Covid surge hurts international performance
- US same-store sales froth 10% higher
A recent tasty rally in Starbucks’ (SBUX:NASDAQ) shares was halted after the coffee roaster and retailer’s first quarter sales and earnings fell short of analysts’ estimates.
The coffeehouse colossus generated impressive same-store sales growth in the US, its biggest market, in the 13 weeks to 1 January 2023.
Sadly, the international performance suffered due to Covid-induced disruption in China, the Flat White-to-Peppermint Mocha seller’s second biggest market.
RECORD FIRST QUARTER REVENUES
Disappointing results (2 February) blew some of the froth off Seattle-based Starbucks’ stock, which was marked down 1.8% to $107.2 in after-hours trading on Wall Street.
Although the Americanos-to-Cappuccinos purveyor reported record first quarter revenues, up 8% to $8.71 billion, this was below the $8.78 billion analysts were calling for, while headwinds in China meant adjusted earnings per share of 75 cents was shy of the 77 cents expected by Wall Street number crunchers.
IMPROVING TREND IN CHINA
International same-store sales fell by 13%, dragged down by a 29% slump in China sales after the Chinese government relaxed its zero-Covid policy. This triggered fresh outbreaks of the virus which forced Starbucks to shutter many of its shops in the country.
The good news is Starbucks’ China same-store sales are improving, with finance director Rachel Ruggeri pointing out that a 42% plunge in December moderated to a 15% decline in January.
And in the US, Starbucks delivered robust first quarter same-store revenue growth of 10% as customers spent more per visit at its outlets.
WHAT SCHULTZ HAD TO SAY
‘Starbucks performance in Q1 demonstrates the strength and resilience of our business and accelerating demand for Starbucks Coffee all around the world,’ enthused founder and interim CEO Howard Schultz, who will hand over the reins to former Reckitt Benckiser (RKT) boss Laxman Narasimhan on 1 April.
‘We posted today’s strong results despite challenging global consumer and inflationary environments, a soft quarter for retail overall and the unprecedented, Covid-related headwinds that unfolded in China in Q1.’
Ruggeri said she was ‘pleased to share that our fiscal 2023 guidance remains unchanged, despite the headwinds from China’. Starbucks is guiding to sales growth of 10% to 12% for its 2023 financial year and adjusted earnings per share growth at the low end of the 15% to 20% range.
