Starbucks Corp beat Wall Street quarterly profit estimates even as its China business suffered a hit due to revenwed Covid-19 lockdowns imposed in the country. The strong earnings was supported by a hike in prices and strong demand from consumers in the US.
Interim CEO of Starbucks, Howard Schultz, said that the company did not witness any measurable reduction in consumer spending despite inflation levels in the US being at a record high. The CEO told investors that although inflation affected the company’s operating margin, it did not see any evidence of consumers trading down.
Starbucks, based in Seattle, posted an earning of 84 cents per share on an adjusted basis, beating Wall Street estimates of 75 cents per share. In extended trading, the company’s stock rose almost 2 percent.
Compared to analysts’ average estimates of a 3.76 percent rise, global sales of the company rose 3 percent for the fiscal quarter ended July 3.
Sales across the US were strengthened by the company’s ability to increase prices without any pushback from customers. Sales were also aided by booming sales of cold beverages, which comprise almost 75 percent of total beverage sales by the company in the US.
Starbucks rewards program membership grows in the US
Active membership for Starbucks’ rewards program in the US grew by 13 percent to 27.4 million members.
Operating margins of the company were affected by higher cost of ingredients and enhanced benefits for US employees. Operating margins fell by 400 basis points to 15.9 percent. Same-store sales in North America posted a growth of 9 percent.
Since last year, Starbucks has been in the midst of a drive that saw workers at 200 stores vote to unionize. However, Schultz announced that the company would only boost benefits and wages for workers in non-unionized stores, a move that is scheduled to start this week.
The company’s business in China was severely hit by Covid disruptions, causing a drop of 44 percent in comparable sales in the Starbuck’s fasted growing market, Chairman of Starbucks China, Belinda Wong said in a statement.
A resurgence of Covid-19 in Beijing and other cities prompted authorities to enforce a fresh round of lockdowns, which forced Starbucks to close its seating areas and only offer deliveries and mobile orders for most of the quarter.
Total net revenue of the company rose to USD8.15 billion, compared to USD7.5 billion for the corresponding period in the previous year, beating an analysts’ average estimate of USD8.11 billion.