Starbucks Profits Grow Despite China Business Hit

Starbucks Posts Quarterly Profit Higher Than Analysts Estimates Despite Damage to Its China Business

Starbucks’ financial results during the third fiscal quarter outperformed Wall Street analysts’ estimates, as prices rose and increased demand for its coffee, especially in the United States, which contributed to offsetting the company’s poor performance in China in light of the renewal of quarantine measures and general closure due to Covid-19. Read more [Starbucks Aspirations Halted as Lockdown Continues in China].

Although inflation reached record levels in the United States, affecting operating profit margins at Starbucks, the coffee chain stated that it is not currently experiencing any significant decline in consumer spending or any evidence of declining customer numbers, according to a statement by CEO Howard Schultz.

The Seattle-based coffee chain earned 84 cents per share on an adjusted basis, beating analyst estimates of 75 cents, sending the company’s stock up 2% during extended trading. However, comparable global sales achieved a growth of 3% during the third fiscal quarter ending on July 3, to record a performance worse than expectations, which was 3.76%. Read more [Discussions to Sell Starbucks Business in The UK].

Total net revenue jumped from $7.5 billion a year ago to $8.15 billion last quarter, slightly above analysts’ expectations of $8.11 billion.

Sales in the US were boosted by Starbucks’ ability to raise prices without affecting demand from its affluent customers, boosting sales of its cold drinks, which currently represent 75% of all its coffee sales in the US, and the number of active members of its rewards program in the country grew by 13% to 27.4 million members.

It is worth noting that the profit margin was affected by the increase in the prices of the components used to manufacture its products and the huge incentives that were offered to employees in the United States, where the operating profit margins shrank by about 400 basis points to 15.9%. Read more [The American Starbucks Exits Russia After 15 years].

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