An employee hands a bag to a customer in a car at a Starbucks coffee shop in Hercules, California, on Thursday, July 28, 2022.
David Paul Morris | Bloomberg | Getty Images
Starbucks Inc on Tuesday reported better-than-expected quarterly earnings and revenue, fueled by demand in the United States for cold brew coffee.
With inflation rising, interim CEO Howard Schultz said the chain isn’t seeing customers pull back or reduce their spending. Other restaurant companies, including McDonald’s and Chipotle Mexican Grill, have seen lower-income consumers visit less frequently or spend less as higher gas and grocery bills squeeze their budgets. Schultz credited Starbucks’ pricing strength and customer loyalty for its ability to resist the trend.
The company’s shares are up more than 1% in extended trading.
Here’s what the company reported for the quarter ending July 3 compared to what Wall Street had been expecting, based on a survey of analysts by Refinitiv:
- 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 financial income attributable to Starbucks of $912.9 million, or 79 cents a share, down from $1.15 billion, or 97 cents a share, a year ago. The company said inflation and higher wages for coffee industry workers affected its margins in the quarter.
Net sales It rose 9% to $8.15 billion. The company reported global same-store sales growth of 3%, buoyed by a stronger performance in the United States.
In the domestic Starbucks market, same-store sales increased 9%, driven largely by average total orders, as well as a 1% increase in traffic. The company said morning sales are returning, making up nearly half of revenue as consumers resume pre-pandemic measures.
The company also noted the popularity of its iced shaken espresso and said cold drinks accounted for three-quarters of US sales this quarter. Schultz said customers are more likely to add modifiers like juice and milk to cold drinks than to hot drinks, raising the price of overall drinks. Cold brews are also popular with Gen Z customers, a major demographic for the coffee chain, according to Schultz.
Outside the US, same-store sales fell 18%, weighed down by lower demand in China. Starbucks said Covid restrictions affected sales in its second-largest market for two-thirds of the quarter. As a result, same-store sales in China fell by 44%. The company is still experiencing periodic short-term shutdowns in China.
Last quarter, Starbucks withdrew its forecast for fiscal year 2022, citing the uncertainty caused by the Covid outbreak in China. The company did not release new forecasts this quarter.
Starbucks opened 318 new locations worldwide during the quarter, bringing its global restaurant count to 34,948.
The company plans to hold an investor day on the 3rd of September. 13 in Seattle to share more about its strategy for the future.
Read the full earnings report here.
Correction: An earlier version of this story is wrong Refinitiv estimates Starbucks’ quarterly revenue.