MILAN – Starbucks reported Thursday quarterly results for its 13-week fiscal first quarter ended January 1st, 2023, that partly missed expectations, as persistent weakness in China business offset strong sales in the North American market. U.S. same-store sales rose 10% versus 9.26% expected. A 29% fall of comparable sales (versus 13.3% expected) in China, Starbucks’ fastest growing market, pulled total international comparable sales down 13% (vs -3.9% expected).
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 drew down its revenue by roughly 3%.
The company also reported earnings per share of 75 cents, adjusted for one-time items, below the 77 cents a share expected by analysts polled by FactSet. Net income reached $855 million, about 5% higher than the $816 million generated in the same quarter a year earlier.
Starbucks: Q1 Fiscal 2023 Highlights
- Global comparable store sales increased 5%, primarily driven by a 7% increase in average ticket, partially offset by a 2% decline in comparable transactions
- North America and U.S. comparable store sales increased 10%, driven by a 9% increase in average ticket and a 1% increase in comparable transactions
- International comparable store sales decreased 13%, driven by a 12% decline in comparable transactions and a 1% decline in average ticket; China comparable store sales decreased 29%, driven by a 28% decline in comparable transactions and a 1% decline in average ticket
- The company opened 459 net new stores in Q1, ending the period with 36,170 stores globally: 51% company-operated and 49% licensed
- At the end of Q1, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 15,952 stores in the U.S. and 6,090 stores in China
- Consolidated net revenues up 8%, to a record $8.7 billion, inclusive of approximately 3% unfavorable impact from foreign currency translation
- GAAP operating margin of 14.4% decreased from 14.6% in the prior year, primarily driven by previously committed investments in labor including enhanced store partner wages and benefits, inflationary pressures and sales deleverage in China, partially offset by strategic pricing in North America and sales leverage across markets outside of China
- Non-GAAP operating margin of 14.5% decreased from 15.1% in the prior year
- GAAP earnings per share of $0.74 grew 7% over prior year, including an estimated $0.06(1) of dilutive impact from China
- Non-GAAP earnings per share of $0.75 grew 4% over the prior year, including an estimated $0.06(1) of dilutive impact from China
- Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 30.4 million, up 15% year-over-year.
“Starbucks performance in Q1 demonstrates the strength and resilience of our business and accelerating demand for Starbucks Coffee all around the world,” said Howard Schultz, interim ceo.
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, Schultz added.
“I am very proud of what we achieved in Q1, with nearly every business segment contributing to our strong performance, commented Rachel Ruggeri, chief financial officer. And I’m pleased to share that our fiscal 2023 guidance remains unchanged, despite the headwinds from China, Ruggeri added.
In his final earnings call, Schultz hinted at a game-changing new “platform” coming to Starbucks later this month.
“While I was in Italy last summer, I discovered an enduring transformative new category and platform for the company unlike anything I’ve ever experienced,” he said during the first quarter conference call.
“The word I would use to describe it without giving too much away is alchemy. It will be a game-changer. So standby.”
Schultz said will travel to Milan later this month “to introduce something much bigger than any new promotion or beverage.”