Starbucks (SBUX-US) announced after the market on Tuesday (2nd) that profit and revenue in the third quarter of the 2022 fiscal year were higher than expected, benefiting from the boost in demand for cold drinks from U.S. consumers, up 1.47% after the market.
Contrary to the industry narrative, Starbucks interim CEO Howard Schultz said that customers did not reduce transactions or spending because of rising inflation, and he credited Starbucks’ pricing power and customer loyalty to resist industry trends.
Restaurant companies such as McDonald’s and Chipotle Mexican Grill have previously said they have seen lower-income consumers eat less at restaurants, or spend less at a time, as higher gas prices and grocery prices make consumers more frugal.
Q3 (ending 7/3) earnings key figures vs. Wall Street estimates Adjusted EPS: 84 cents vs. 75 cents Net revenue: 9% YoY to $8.15 billion vs. $8.11 billion Net income: 912.9 million USD or 79 cents per share
Starbucks said third-quarter net profit was $912.9 million, down from $1.15 billion, or 97 cents a share, in the same period a year earlier, as inflation and higher barista pay hurt third-quarter profit margins.
Starbucks said global same-store sales rose 3 percent, mainly due to a strong boost in the U.S. region.
Same-store sales in Starbucks’ home market, the U.S., rose 9% year over year, mainly due to an increase in average order totals and a 1% increase in foot traffic. Morning sales, which account for half of Starbucks’ total revenue, are recovering as consumers resume their pre-pandemic routines, the company said.
Starbucks also noted that iced espresso is quite popular, with cold drinks accounting for three-quarters of U.S. sales in the fiscal third quarter. Customers are more likely to add things like syrups and milk to cold drinks compared to hot drinks, increasing the overall beverage price, Schultz said, and Gen Z customers, a staple of Starbucks, prefer cold drinks.
Outside the U.S., same-store sales fell 18% as demand in China plummeted. Starbucks said that epidemic prevention restrictions hit two-thirds of sales in its second-largest market, China, in the fiscal third quarter, resulting in a 44% drop in same-store sales in China.
Starbucks last quarter withdrew its forecast for fiscal 2022, citing uncertainty caused by the coronavirus outbreak in China, and did not release a new forecast for the third quarter.
Starbucks opened 318 new stores worldwide in the fiscal third quarter, bringing the global total to 34,948.
Starbucks plans to hold an investor day in Seattle on September 13, where it will announce more future operating strategies.