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Starbucks Corp. reported sales that exceeded expectations as US consumers forked over more for their lattes amid higher economy-wide inflation, driving the shares higher in late trading.
The key measure of same-store sales rise 7% in the quarter ended October 2 — above the average estimate for 4.1% global growth compiled by Bloomberg. Internationally, same-store sales shrank, but less than anticipated by Wall Street. The company laid out an optimistic outlook for the next 12 months in a call with analysts.
The results show that Starbucks’ signature lattes and frappuccinos remain a luxury that consumers are willing to pay for, even if they cost more. The majority of 11% comparable-store sales growth in North America was driven by a rise in amount spent per order. There was only a slight raise in transactions, suggesting that store traffic is stable, but customers are paying more.
The company pointed to “strategic†price increases that were “primarily in North America.†Interim Chief Executive Officer Howard Schultz told analysts that Starbucks isn’t looking to raise prices more, yet the company hasn’t seen any impact on loyalty or orders when it’s increased prices before. He added that the company’s customers have gotten younger, and those consumers have a significant amount of discretionary income at their disposal.
The firm expects US comparable sales to be at high end of its prior guidance for growth of 7% to 9% in current fiscal year. Starbucks also sees earnings in the period near the top of the projected 15% to 20% growth range.
Operating margin falls from a year earlier, reflecting pressure from inflation as well as company’s initiatives to boost pay and training for baristas and improve equipment to make their jobs easier. The firm is looking to blunt a unionisation drive at its US locations by raising pay and improving benefits.
—Bloomberg