BENGALURU - Starbucks missed market expectations for quarterly comparable sales on Tuesday, with demand for its coffees and cold drinks showing some signs of tapering in the North American and international markets even as China sales rebounded sharply.
The world’s largest coffee house chain has targeted its younger, wealthier US customer base by launching new drinks and promoting food options that have helped drive up average customer sales.
But quarterly transactions climbed just 1 per cent in North America, slowing from a 6 per cent increase in the prior quarter.
However, Starbucks saw a sharp recovery in China, with comparable sales surging 46 per cent in the third quarter.
That rebound was in line with its expectations and is expected to last, company officials told investors in a call.
“China, I think, is what’s holding the stock up here,” Mr Sante Faustini III, director of product intelligence at research firm M Science, told Reuters.
Shares of Starbucks were marginally lower in after-hours trading even as the coffee chain topped Wall Street estimates for quarterly profit and slightly lifted its outlook for full-year earnings growth.
Mr Faustini III said the 7 per cent rise in North America comparable sales was “light”, adding that the focus was on booming China sales.
Starbucks projected average weekly sales in China to grow in the low- to mid-single digits range in the current quarter, resulting in similar comparable sales growth.
It also cited a record more than 20 million members for its customer loyalty programme in China, its largest market outside the United States, which has 31.4 million rewards members.
Chinese travel in cities, as tracked through subway rides, rose roughly 128 per cent in the quarter and returned to 2019 pre-pandemic levels, according to analysts at BofA Global Research, noting that Starbucks sales trends typically coincide with subway data.
Overall, the company now expects full-year earnings growth in the range of 16 per cent to 17 per cent, compared with its prior outlook of towards the low end of 15 per cent to 20 per cent growth range.
It maintained its forecast for full-year comparable sales growth near the high end of a 7 per cent to 9 per cent range, compared with Wall Street’s expectations of an 8.7 per cent rise among 14 analysts polled by Refinitiv.
Starbucks executives told investors said they expected revenue pressure to continue in the fourth quarter, driven by at-home coffee business, and for pricing trends to moderate in the final quarter following several months of price hikes.
Global comparable sales at Starbucks rose 10 per cent, compared with analysts’ expectations for an 11.8 per cent rise, Refinitiv IBES data showed.
In its international segment, same-store sales rose 24 per cent, also missing estimates of 25.7 per cent. REUTERS
