Friday 19 August 2022

Starbucks reports Q3 consolidated net revenues up 9% to a record $8.2 billion

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SEATTLE, USA – Starbucks Corporation reported on August 2, 2022, better-than-expected results for its 13-week fiscal third quarter ended July 3, 2022. Sales of cold coffee drinks and refreshers helped propel the coffee giant’s revenue to a record $8.2 billion in the latest quarter. Iced shaken espresso and said cold beverages accounted for three quarters of US sales this quarter. Cold drinks are also popular with Gen Z customers, a key demographic for the coffee chain.

Quarterly earnings reached $0.84 per share, beating the consensus estimate of $0.77 per share. However, this compares to earnings of $1.01 per share a year ago. These figures are adjusted for non-recurring items.

Increased costs related to higher commodity prices and wages as well as Covid-related shutdowns and restrictions in China weighted on Starbucks’ overall earnings.

Operating income fell 13 percent in the quarter to $1.3 billion from $1.5 billion the previous year.

The company reported global same-store sales growth of 3%, fueled by a stronger performance in the United States.

Same-store sales in the US increased 9%, driven largely by higher average order totals, as well as a 1% uptick in traffic. Morning sales are returning, the company said, making up roughly half of revenue as consumers resume pre-pandemic routines.

Starbucks’ international sales fell 18% in the quarter, dragged down by poor results in China. Discounting the sales drop there, international growth would have been up by double digits, the company said.

In the three months ending on July 3, sales at Starbucks’ Chinese locations open at least 13 months dropped 44%.

Starbucks opened 318 net new locations worldwide during the quarter, bringing its global restaurant count to 34,948.

Starbucks Q3 Fiscal 2022 Highlights:

  • Global comparable store sales increased 3%, driven by a 6% increase in average ticket, partially offset by a 3% decline in comparable transactions
    • North America comparable store sales increased 9%, driven by an 8% increase in average ticket and a 1% increase in comparable transactions; U.S. comparable store sales increased 9%, primarily driven by an 8% increase in average ticket
    • International comparable store sales decreased 18%, driven by a 15% decline in comparable transactions and a 4% decline in average ticket; China comparable store sales decreased 44%, driven by a 43% decline in comparable transactions and a 1% decline in average ticket
  • The company opened 318 net new stores in Q3, ending the period with 34,948 stores globally: 51% company-operated and 49% licensed
    • At the end of Q3, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 15,650 stores in the U.S and 5,761 stores in China
  • Consolidated net revenues up 9% to a quarterly record $8.2 billion, including a 2% adverse impact from foreign currency translation
  • GAAP operating margin of 15.9% decreased 400 basis points from 19.9% in the prior year, primarily driven by inflationary pressures, investments in labor including enhanced store partner wages as well as sales deleverage related to COVID-19 restrictions in China, partially offset by pricing in North America and leverage across markets outside of China
    • Non-GAAP operating margin of 16.9% decreased from 20.4% in the prior year
  • GAAP earnings per share of $0.79, down from $0.97 in the prior year
    • Non-GAAP earnings per share of $0.84, down from $0.99 in the prior year
  • Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 27.4 million, up 13% year-over-year

“We have clear line-of-sight on what we need to do to reinvent the company, elevate our partner and customer experiences and drive accelerated, profitable growth all around the world,” said Howard Schultz, interim chief executive officer. “The Q3 results we announced today demonstrate the early progress we have made in just four short months,” Schultz added.

“We delivered record-breaking revenue performance during the quarter from continued strength in customer demand globally, balanced with our ability to execute investments despite macroeconomic and operational headwinds. Our commitment to deliver shareholder value has not wavered, and we are making the right decisions and investments today for the future of Starbucks,” commented Rachel Ruggeri, chief financial officer.

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