Starbucks U.S. Sales Rise as Customers Buy More Premium Drinks

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Starbucks reported earnings and sales for the third quarter on Thursday that were higher than what analysts had predicted. This was because U.S. customers spent more on iced coffee drinks and Pumpkin Spice Lattes. The Seattle-based coffee company also said that traffic in the U.S. got better during the quarter and is almost back to where it was in 2019.

“Despite elevated pricing actions taken throughout the year, daily store traffic in the U.S. reached approximately 95% pre-pandemic levels in September fueled by the wildly successful fall promotion,” Chief Financial Officer Rachel Ruggeri said on the company’s quarterly conference call.

Shares went up 2.7% after business hours. Based on a survey of analysts by Refinitiv, here’s what the company said for the quarter that ended on October 2 and what sources was expecting:

  • Earnings per share: 81 cents adjusted vs. 72 cents expected
  • Revenue: $8.41 billion vs. $8.31 billion expected

During the time frame, net sales went up by 3.3% to $8.41 billion. Global same-store sales went up by 7%, which was driven by more money being spent in its home market.

Starbucks’ same-store sales grew by 11% in the United States. This was because people spent more on average and there was a small increase in traffic.

Prices were also 6% higher than they were a year ago, but business leaders said they don’t plan to raise prices anymore for now.

More than three-quarters of the drinks sold at company-owned cafes in the U.S. were cold drinks. Starbucks said that more customers are adding expensive syrups, cold foam, and dairy substitutes to their cold drinks, which drives up the price.

But people still buy hot coffee drinks as well. Starbucks North American President Sara Trilling says that Pumpkin Spice Latte sales are up 70% from the same time last year.

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In the last quarter, 16% more people joined the company’s loyalty program bringing the total number of active members to 28.7 million.

In September, the Seattle-based company announced a big plan to change the way it does business to meet the changing needs of customers and employees. Some of these changes will include new tools that will make it easier to make cold drinks.

China’s restrictions on Covid-19 continued to hurt Starbucks’ international performance outside of the U.S. StreetAccount says that the company’s international same-store sales fell by 5%, which was not as much as the 7.1% drop that was expected. Same-store sales in China, which is Starbucks’ second-biggest market, dropped 16% during the quarter.

“We anticipate the current Covid-related uncertainty to continue,” CEO Howard Schultz said.

Starbucks expects its sales to grow by 10% to 12% in fiscal 2023, even though the conversion of foreign currencies will hurt sales by 3%. The company also thinks that its global same-store sales growth will be at the high end of the range of 7% to 9% it had given before. But because of lockdowns in China, the fiscal first quarter is likely to be on the lower end of that range.

Starbucks also said that the costs of its reinvention plan will cause its adjusted earnings per share to grow at the low end of its previous range of 15% to 20% in fiscal 2023.

Ruggeri also said that the company thinks commodity headwinds will continue into fiscal 2023, but at a lower level than in fiscal 2022.

For its fourth quarter, Starbucks had a net income of $878.3 million, or 76 cents per share. This is less than the $1.76 billion, or $1.49 per share, it made a year earlier.

Starbucks made 81 cents per share after taking out costs for restructuring and impairment, the sale of its Russian joint venture, and other things.

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