Starbucks beats quarterly sales estimate on pricey drinks, China market By Reuters


© Reuters. FILE PHOTO: A Starbucks sign is shown on one of the company’s stores in Los Angeles, California, U.S. October 19, 2018. REUTERS/Mike Blake/File Photo GLOBAL BUSINESS WEEK AHEAD

By Deborah Mary Sophia and Hilary Russ

(Reuters) -Starbucks Corp topped Wall Street estimates for quarterly comparable sales on Thursday, as demand in North America for pricier drinks remained strong and declines in China were not as bad as feared.

Shares in the Seattle-based company rose about 1.5% in after-market trading.

While restaurants such as McDonald’s Corp (NYSE:) and Yum Brands Inc have drawn inflation-hit Americans with cheaper meals, higher priced Starbucks (NASDAQ:) coffee and cold beverages have enjoyed a steady stream of higher-income customers.

The company’s U.S. comparable sales rose 11% in the quarter, also boosted by the return of its iconic Pumpkin Spice Latte – which, according to Credit Suisse analysts, contributed to the highest sales week in Starbucks’ history.

The jump helped Starbucks cushion the hit from a 16% decline in comparable sales in China – its fastest growing market – where it is still reeling under a zero-COVID policy that has shut its seating areas.

Wall Street analysts expected Starbucks’ comparable sales in China to drop by 20%, according to analysts at Gordon Haskett. The company had reported a 44% slump in the previous quarter.

“We saw accelerating demand for Starbucks coffee around the world in Q4 and throughout the year,” interim Chief Executive Officer Howard Schultz said in a statement.

Schultz is set to depart as of April 1, when Laxman Narasimhan will take over the role.

Some investors told Reuters they are looking to Narasimhan to address challenges including a growing union movement at U.s. cafes and an overhaul of stores with new equipment to make coffees and lattes more quickly.

Global comparable sales at Starbucks rose 7% in the fourth quarter ended Oct. 2, while analysts on average had expected a 4.2% rise, according to Refinitiv IBES.

The company expects global comparable sales for fiscal 2023 to be near the high end of its previous long-term guidance of 7% to 9%, it said on Thursday.

Total net revenue rose to $8.41 billion from $8.15 billion a year earlier, compared with analysts’ average estimate of $8.31 billion.

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