Starbucks posts better-than-expected profit in fiscal 1Q
SEATTLE (AP) — Improved U.S. holiday sales helped Starbucks Corp. achieve better-than-expected results in its fiscal first quarter.
After a disappointing holiday in 2017, Starbucks made some changes. This past year, holiday drinks went on sale earlier and the company removed some merchandise from the lobby to make a clearer path to gift cards.
It worked. Starbucks Chief Operating Officer Roz Brewer said gift card sales — which were down last year — jumped 12 percent to $2.6 billion in its fiscal first quarter that ended Dec. 30.
Net revenue for Starbucks’ Americas segment rose 8 percent to $4.6 billion. Same-store sales growth was up 4 percent. Store transactions were flat, but customers spent more per visit.
Starbucks hopes to boost U.S. sales by adding a delivery option through UberEats. It announced earlier this week that the service is launching soon at some stores in San Francisco, New York, Boston, Washington, Chicago and Los Angeles. Brewer said more cities will be announced at the end of the second quarter. Tests last fall in Miami indicated that customers spent slightly more on delivery orders, Brewer said.
In Starbucks’ Asia Pacific region, its other key market, revenue jumped 45 percent to $1.2 billion. Same-store sales growth rose 3 percent in Asia Pacific. Transactions were up 1 percent.
Same-store sales were down 1 percent in the Europe, Middle East and Africa segment.
John Culver, Starbucks’ group president of international operations, said Starbucks’ plan to open 600 stores per year annually in China over the next four years is on track despite headlines about a slowing economy there.
“We are playing the long game,” Culver said in a conference call with analysts and media.
The Seattle-based company earned $760.6 million, or 61 cents per share, during the quarter. Earnings, adjusted for non-recurring costs like restructuring expenses, were 75 cents per share. Analysts had forecast earnings of 65 cents per share, according to Zacks Investment Research.
Starbucks posted revenue of $6.63 billion in the period, also topping Wall Street’s forecast of $6.49 billion.
Starbucks reiterated its plan to open 2,100 net new stores globally in fiscal 2019. It expects full-year earnings in the range of $2.68 to $2.73 per share.
Starbucks shares rose nearly 2 percent to $65.96 in after-hours trading.
Neil Saunders, managing director of the consulting firm GlobalData Retail, said Starbucks delivered strong numbers in the first quarter, but it could be tested if economic conditions become more challenging in its key markets.
“Overall, the prospects for Starbucks look good in the short term, reasonable in the medium term, but somewhat more challenging over the longer term,” he said.
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