Starbucks exceeded expectations, spurred by high demand for cold drinks in the U.S.


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Despite rising prices, U.S. consumers still want to go to Starbucks for their morning coffee.

After Coca-Cola mentions Covid in China caused some concern, it adjusted its fiscal outlook for 2022.

China’s same-store sales plummeted 44% during the company’s third fiscal quarter.

The coffee company Starbucks posted better-than-expected quarterly earnings and revenue on Tuesday, which they say is because of demand for their cold coffee drinks in the U.S.

Amid inflation and in anticipation of increases, CEO Howard Schultz is noticing no customers are downgrading or reducing their spending. In addition to McDonald’s and Chipotle Mexican Grill, other restaurant companies have seen low-income consumers visit less frequently or spend less as gas and grocery prices increase. Its ability to buck the trend was attributed to its pricing power and customer loyalty, according to Schultz.

Shares of the company climbed over 1% during after-hours trading.

Here is the quarterly report the company submitted compared to what Wall Street analysts predicted.

Earnings per share: 84 cents adjusted versus 75 cents expected.

Income for the fiscal year ended: $8.15 billion vs. expected income of $8.11 billion.

The company reported a third-quarter net income of $912.9 million, a decrease of 79 cents per share, compared to $1.15 billion, or 97 cents per share, a year earlier. The company noted that the increase in inflation and barista wages has caused them to suffer financially this quarter.

The company’s net sales rose 9% to $8.15 billion. This came as global same-store sales rose 3%, buoyed by strong US sales.

The company’s home market saw same-store sales growth of 9%, largely due to higher average order totals as well as a 1% uptick in traffic. As consumers resume pre-pandemic routines, morning sales are returning, the company said. They account for roughly half of revenue now.

Image Source: Topology Pro

The company also mentioned the popularity of its iced shaken espresso in the U.S. and said that cold beverages accounted for three quarters of sales this quarter. Schultz said that cold drinks are more likely to have modifiers like syrups and milks added to them, raising the price of all their drinks in general. And Gen Z customers like their cold drinks as well, according to Schultz.

In other countries outside the U.S., same-store sales fell 18% due to low demand in China. Covid restrictions impacted Starbucks’ second-largest market for two-thirds of the quarter. As a result, China’s same-store sales plunged 44%. Occasionally, the company has to close operations in China.

Starbucks pulled its fiscal 2022 outlook last quarter, citing uncertainty caused by Covid outbreaks in China. The company did not issue a new forecast this quarter.

As a result of the new locations, Starbucks now has 34,948 restaurants worldwide.

We plan to hold an investor day on Sept. 13 in Seattle to discuss our future strategies.


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