Starbucks beats profit estimates despite China business hit

A Starbucks sign is displayed at one of the company’s stores in Los Angeles, California, U.S., October 19, 2018. REUTERS/Mike Blake GLOBAL BUSINESS WEEK AHEAD

Aug 2 (Reuters) – Starbucks Corp (SBUX.O) beat Wall Street estimates for quarterly profit on Tuesday as higher prices and strong demand for its coffees in the United States helped offset a blow to businesses in China due to new COVID-19 shutdowns.

Despite record inflation in the United States that has eaten away at Starbucks’ operating margin, the chain “is not currently seeing any measurable reduction in customer spending or evidence of lower customer spending,” the acting chief executive said. , Howard Schultz, to investors on a conference call. .

The Seattle-based chain earned 84 cents per share on an adjusted basis, beating estimates of 75 cents. Shares of the company rose nearly 2% in extended trading.

However, comparable global sales rose 3% in the fiscal third quarter ended July 3, compared to analysts’ average estimate of a 3.76% rise, according to Refinitiv IBES.

Sales in the United States were boosted by Starbucks’ ability to raise prices without being pushed back by its wealthier customers and its booming sales of cold beverages, which now account for about 75% of total beverage sales in the United States. company-operated cafes in the United States.

Its active membership in the United States of its rewards program also grew by 13% to 27.4 million members.

Higher ingredient costs and improved benefits for some US employees hurt operating margins, which fell 400 basis points to 15.9%. Same-store sales increased 9% in North America.

As she pushes back on an organizing drive that has prompted workers at 200 stores to vote to unionize since last year, Schultz said in April the company would raise benefits and wages — but only for workers non-union stores – starting this week.

China was hit by “the most severe COVID disruption since the start of the pandemic,” with comparable sales in the company’s fastest-growing market falling 44% in the quarter, it said. Belinda Wong, president of Starbucks China, on the call.

A new round of shutdowns in Shanghai and a resurgence of COVID-19 in Beijing and other Chinese cities have forced Starbucks stores to close seating areas, allowing the company to only offer mobile delivery or ordering during most of the quarter.

Total net revenue rose to $8.15 billion from $7.5 billion a year earlier, beating analysts’ average estimate of $8.11 billion.

Reporting by Deborah Sophia in Bengaluru and Hilary Russ in New York Editing by Maju Samuel, Peter Henderson and Matthew Lewis

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