Starbucks earnings beat as China reverses same-store sales declines

Starbucks on Tuesday reported quarterly earnings and revenue that beat analysts’ expectations, fueled by better-than-expected international sales.

In China, the company’s second-largest market, Starbucks saw its same-store sales increase for the first time since Starbucks’ fiscal third quarter in 2021, as customers returned to its cafes following the rollback of Beijng’s zero-Covid policy.

However, shares fell 5.6% in extended trading after executives reaffirmed its full fiscal-year outlook.

Here’s what Starbucks reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: 74 cents adjusted vs. 65 cents expected
• Revenue: $8.72 billion vs. $8.4 billion expected

The coffee giant reported fiscal second-quarter net income of $908.3 million, or 79 cents per share, up from $674.5 million, or 58 cents per share, a year earlier.

Excluding items, Starbucks earned 74 cents per share.

Net sales rose 14.2% to $8.72 billion. The company’s same-store sales climbed 11% in the quarter, beating StreetAccount estimates of 7.1%. Both the U.S. and international markets outperformed expectations.

“This is remarkable on any level, but specifically given the seasonality pressures we typically experience in [the second quarter],” finance chief Rachel Ruggeri said on the company’s conference call.

U.S. same-store sales jumped 12% on a 6% increase in traffic. Some restaurant companies, like Outback Steakhouse owner Bloomin’ Brands, have reported shrinking traffic as customers pull back on dining out. Starbucks joins fellow outliers like McDonald’s and Chipotle Mexican Grill, which also saw traffic jump.

The company said its active U.S. loyalty program members gained 15% from the year-ago period to 30.8 million during the quarter ended April 2.

Outside the U.S., the coffee chain’s same-store sales increased 7%.

In China, the metric rose 3%. Starbucks China Chair Belinda Wong said that the business saw 30% same-store sales growth in March and that momentum has continued into the fiscal third quarter.

“We’re very encouraged by the signs that we see, but there’s a lot that we’re navigating,” Ruggeri said.

Last quarter, then-CEO Howard Schultz said the company expected its business in China would recover in the second half of fiscal 2023.

Starbucks reaffirmed its fiscal-year outlook, projecting revenue growth of 10% to 12% and adjusted earnings-per-share growth on the low end of 15% to 20%.

Starbucks opened 464 net new locations during the quarter.