Starbucks Corp (NASDAQ: SBUX) on Tuesday reported better-than-expected third-quarter earnings as higher prices and strong demand for its coffees in the United States helped offset the losses it incurred from China due to renewed COVID-19 lockdowns.
Despite record inflation in the US that ate into the coffee chains’ operating margin, Starbucks is “not currently seeing any measurable reduction in customer spending or any evidence of customers trading down,” interim Chief Executive Officer Howard Schultz told investors on a conference call.
The Seattle-based chain earned 84 cents per share on an adjusted basis, beating the Wall Street estimate of 75 cents.
However, global sales rose 3% in the fiscal third quarter ended July 3, compared with analysts’ estimate for a 3.76% rise.
US sales were boosted by the company’s ability to raise prices without receiving significant pushback and its booming sales of cold beverages, which now make up about 75% of total beverage sales.
Active membership in the US in Starbucks’ rewards program also grew 13% to 27.4 million members.
Higher costs for ingredients and enhanced benefits for some US employees affected operating margins, which fell by 400 basis points to 15.9%. Same-store sales grew 9% in North America.
China was hit by the “most severe COVID disruption since the pandemic began,” with sales in the company’s fastest-growing market slumping 44% in the quarter, Belinda Wong, chairman of Starbucks China, said during the call.
Total net revenue increased to $8.15 billion from $7.5 billion a year earlier, edging past analysts’ average estimate of $8.11 billion.
Picture Credit: BBC
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