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Starbucks on Thursday reported quarterly earnings and revenue that topped analysts’ estimates, fueled by U.S. customers spending more on iced coffee drinks and Pumpkin Spice Lattes.
The Seattle-based coffee company also said U.S. traffic improved in the quarter, and has nearly bounced back to 2019 levels.
“Despite elevated pricing actions taken throughout the year, daily store traffic in the U.S. reached approximately 95% pre-pandemic levels in September fueled by the wildly successful fall promotion,” Chief Financial Officer Rachel Ruggeri said on the company’s quarterly conference call.
Shares rose 2.7% in after-hours trading.
Here’s what the company reported for the quarter ended Oct. 2 compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:
- Earnings per share: 81 cents adjusted vs. 72 cents expected
- Revenue: $8.41 billion vs. $8.31 billion expected
Net sales for the period rose 3.3% to $8.41 billion. Global same-store sales increased 7%, fueled by increased spending in its home market.
In the United States, Starbucks reported same-store sales growth of 11%, which was the result of people spending more on average and a slight uptick in traffic. Prices were also up 6% from a year ago, but executives said they don’t plan to raise prices anymore for the time being.
Cold beverages accounted for more than three-quarters of beverage sales at U.S. company-owned cafes. Starbucks said customers are more likely to add pricy syrups, cold foam and dairy substitutes to cold drinks, driving up their price.
But customers are also still buying hot coffee drinks. Pumpkin Spice Latte sales climbed 70% compared with the year-ago period, according to Starbucks North American President Sara Trilling.
The company’s loyalty program saw its active membership climb 16% to 28.7 million people in the quarter.
In September, the Seattle-based company unveiled a broad plan to reinvent its business to address changing consumer and employee needs. Some of those updates will include new equipment to make cold drinks more easily.
Outside the U.S., Covid-19 restrictions in China continued to weigh on Starbucks’ international performance. The company’s international same-store sales fell 5%, which wasn’t as steep as the 7.1% expected decline, according to StreetAccount. Same-store sales in China, Starbucks’ second-largest market, fell 16% in the quarter.
“We anticipate the current Covid-related uncertainty to continue,” CEO Howard Schultz said.
For fiscal 2023, Starbucks is projecting revenue growth of 10% to 12%, despite a 3% hit from foreign currency translation. The company also expects its global same-store sales growth on the high end of its prior range of 7% to 9%. However, the fiscal first quarter will likely be on the low end of that range due to lockdowns in China.
Starbucks also said that its adjusted earnings per share growth in fiscal 2023 will be on the low end of its prior range of 15% to 20%, citing the costs of its reinvention plan.
Ruggeri also said that the company is predicting that commodity headwinds will continue into fiscal 2023, although at a lower level than in fiscal 2022.
For its fourth-quarter net income attributable to Starbucks of $878.3 million, or 76 cents per share, down from $1.76 billion, or $1.49 per share, a year earlier.
Excluding restructuring and impairment costs, the sale of its Russian joint venture and other items, Starbucks earned 81 cents per share.