Starbucks misses Q3 comparable same-store sales estimates, China sees 46% sales growth
This is Laxman Narasimhan's second earnings report since he took the helm from Howard Schultz in March.
Starbucks (SBUX) posted mixed fiscal third quarter results on Tuesday after market close. Following the results, shares remained relatively flat.
The Seattle-based coffee giant beat on earnings, but posted a miss on revenue and same-store sales. Adjusted earnings per share came in $1.00, a bit higher than expected, $0.95. Revenue increased 12% to a record $9.2 billion, but that was lower than Bloomberg consensus estimates of $9.3 billion. Same-store sales came in short of analysts' expectations too, up 10%, compared to an estimates of 11.12% increase.
CEO Laxman Narasimhan said he's "confident" Starbucks will continue to pursue a strong growth narrative, despite the mixed results. In the release he said, there are "multiple paths available for the company to drive significant growth and margin improvement, which position us well to create outsized long-term shareholder value."
The company's operating margin increased to 17.5%, up from 15.9% in Q3 of last year, driven by improvements in pricing and productivity.
Shares are up 2% year-to-date.
In North America, sales increased 7%. Estimates for the segment were 8.2%. The average ticket size jumped 6% in the region, in part to higher prices, in addition to customers adding food to their orders and customizing their beverages with alternate milks, syrups, sauces, among others additions. However, they seem to be going less. Transactions are up 1%, lower than expectations of up 3%.
Almost in line with expectations, international same-store sales spiked 24%, compared to estimates of 24.5%. On an international basis, transactions were up 21%, a tick lower than expectations of up 23%, but consumers seem to be spending less overseas too. The average ticket size came in far lower than estimates, up 2% compared to expectations of a 8% increase.
China boosted international growth through last quarter as the impact of the COVID-19 lockdowns move further into the rearview mirror.
Sales in China were up 46%, higher than estimates of up 41.8%. Foot traffic there was also up an extraordinary 48%, but customers added less to their orders, the average ticket size dropped by 1%.
At the end of this quarter, the US and China made up 61% of the company's portfolio, with 16,144 and 6,480 stores, respectively. Last September, Starbucks announced its 6,000th store opening in China.
This quarter, the company opened 588 new stores, bringing its total store count to 37,222 stores, with 51% company-operated and 49% licensed.
Starbucks' loyalty app gained momentum yet again, even after the company implemented changes that went into effect February 13. The number of total active members increased by 15% year-over-year to 31.4 million.
For fiscal year 2023, the company now expects earnings growth of 16% to 17%, up from a previous fiscal year guidance range of 15% to 20%.
This is Laxman Narasimhan's second earnings report since he took the helm from Howard Schultz on March 23, following a nearly six-month immersion experience at the company.
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Brooke DiPalma is a reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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