An employee hands a bag to a customer at the drive-thru of a Starbucks coffee shop in Hercules, Calif., Thursday, July 28, 2022.
David Paul Morris | Bloomberg | Getty Images
Starbucks Tuesday reported better-than-expected quarterly earnings and revenue, fueled by demand in the United States for its cold coffee drinks.
As inflation rises, interim CEO Howard Schultz said the chain doesn’t see customers cutting back or cutting spending. Other catering companies, including McDonald’s and Chipotle Mexican Grill, have seen low-income consumers visit less often or spend less as higher gas and grocery bills squeeze their budget. Schultz credited Starbucks’ pricing power and customer loyalty for its ability to turn the tide.
Shares of the company rose more than 1% in extended trading.
Here’s what the company reported for the quarter ended July 3 compared to what Wall Street expected, based on a Refinitiv analyst survey:
- Earnings per share: 84 cents adjusted vs. 75 cents expected
- Revenue: $8.15 billion vs. $8.11 billion expected
The coffee giant reported third-quarter net income attributable to Starbucks of $912.9 million, or 79 cents per share, from $1.15 billion, or 97 cents per share, a year earlier. The company said inflation and higher wages for baristas weighed on its margins this quarter.
Net sales rose 9% to $8.15 billion. The company reported global same-store sales growth of 3%, fueled by a stronger performance in the United States.
In Starbucks’ home market, same-store sales increased 9%, primarily due to higher average total orders, as well as a 1% increase in traffic. Morning sales are returning, the company said, accounting for about half of revenue as consumers resume their pre-pandemic routines.
The company also noted the popularity of its iced espresso shake and said cold drinks accounted for three-quarters of U.S. sales this quarter. Schultz said customers are more likely to add modifiers such as syrups and milks to cold drinks than to hot drinks, which increases the price of the overall drink. The cold drinks are also popular with Gen Z customers, a key demographic for the coffeehouse chain, according to Schultz.
Outside the United States, same-store sales fell 18%, weighed down by falling demand in China. Starbucks said Covid restrictions affected sales in its second market for two-thirds of the quarter. As a result, same-store sales in China fell 44%. The company is still experiencing periodic short-term shutdowns in China.
Last quarter, Starbucks withdrew its outlook for fiscal 2022, citing uncertainty caused by the Covid outbreaks in China. The company did not release new guidance this quarter.
Starbucks opened 318 net new locations worldwide during the quarter, bringing its global restaurant count to 34,948.
The company plans to hold an Investor Day on Sept. 13 in Seattle to learn more about its strategy going forward.
Read the full earnings report here.
Correction: an earlier version of this story was wrong Refinitiv estimates of Starbucks quarterly revenue.