Company posts its first global sales increase in nearly 2 years
Starbucks (SBUX) reported quarterly results on Wednesday that showed profits missed forecasts and US sales remain lackluster, but the company’s first positive quarter of global same-store sales in nearly two years pushed shares higher following the numbers.
In its fiscal fourth quarter ended Sept. 28, Starbucks reported adjusted earnings per share of $0.52, missing forecasts for EPS of $0.55. Revenue came in ahead of estimates, tallying $9.6 billion against expectations for $9.34 billion, according to Bloomberg data.
US same-store sales were flat and in line with estimates. Same-store sales in China rose 2%, a shade less than the 2.2% expected. Over 60% of Starbucks’ store base is in the US and China.
Global same-store sales, however, rose 1%, a surprise increase against forecasts for a 0.5% decline and the first time in seven quarters the company posted positive global comp sales.
Starbucks stock rose as much as 3% following the release, but gave up gains in after-hours trading.
“We’re on a multiyear turnaround, Q4 was a turning time, having delivered the first quarter of global comp growth in seven quarters,” CEO Brian Niccol told investors on its earnings call.
He added, “Turnarounds are difficult to forecast. … While we have good reason to believe that our U.S. company-operated comps [same-store sales] should build through the year, we also know that recoveries are not always linear.”
The company said it closed 627 stores during the quarter, with 90% of them in North America. These closures were part of the company’s plans to close unprofitable locations and cut corporate jobs, which eliminated 900 non-retail roles and closed open positions as part of a $1 billion restructuring effort.
“These coffee houses were deemed unable to meet our standards for customer experience, even through a potential uplift or for profitability,” CFO Cathy Smith said.
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The quarter, which also included the return of Starbucks’ pumpkin spice latte (PSL) in late August, doesn’t seem to have brewed enough excitement from the Street, with expectations for a sluggish start to its new fiscal year.
“Visitation trends do not appear to have improved” in the current quarter, Stifel analyst Chris O’Cull wrote in a note to clients. O’Cull added that signs of a same-store sales recovery, especially during the holiday season, will be “crucial for near-term share price performance.”
Niccol said the company was “encouraged” by trends that have developed so far in its fiscal first quarter. But he added that customers are “going to be more choiceful with where they choose to spend their dollars” in the near-term.
