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Starbucks delivers strong quarter as sales climb amid higher prices

Starbucks fourth-quarter revenue increased 3.3% to a record $8.41 billion.

Consumers are willing to pay higher prices when it comes to Pumpkin Spice lattes and other coffee beverages at Starbucks.

The coffee giant reported fourth quarter earnings and sales that topped analysts’ expectations amid higher prices and improved traffic at its U.S. locations. On the company’s earnings call, interim CEO Howard Schultz said Starbucks has increased prices by nearly 6% during the past 12 months and has not seen its demand lessen. 

He also noted that Starbucks was attracting more younger customers.

“And that young, Gen Z customer tends to have significantly more discretionary money at their disposal,” he said. “And their loyalty to Starbucks has been quite significant and predicted.”

The company said the 90-day active members in its U.S. rewards loyalty program rose to 28.7 million, up 16% compared to a year ago.

Starbucks’ net income totaled  $878 million for the quarter ended Oct. 2, compared with $1.76 billion in the year-ago period.  Adjusted earnings were $0.81 per share, beating analysts expectations for $0.72 per share.

Revenue for the quarter  increased 3.3% to a record $8.41 billion. Global same-store sales increased 7%, primarily driven by an 8% increase in average ticket.

In the U.S., same-store sales rose 11%, fuled by a 10% increase in average ticket size and a 1% increase in comparable transactions. Cold beverages accounted for more than three-quarters of beverage sales at U.S. company-owned cafes.

International same-store sales fell 5%, with a 16% drop in China amid ongoing pandemic-related lockdowns. China is Starbucks’ second biggest market after the U.S.

In September, Starbucks launched its “Reinvention” plan, which it designed to update its business to address changing consumer and employee needs.  It also announced aggressive expansion plans.

Also in September, the company announced that Laxman Narasimhan would succeed Schultz as CEO on April 1, 2023.  Narasimhan officially joined Starbucks as as incoming chief executive on Oct. 1, and will work closely with Schultz  before taking the reins and joining the board in April

“Our Q4 results demonstrate early evidence of the success of our U.S. Reinvention investments,” stated Schultz. “Reinvention will touch, and elevate, every aspect of our Starbucks partner, customer and store experiences, and ideally position Starbucks to deliver accelerated, sustainable, long-term, profitable growth and value creation beginning in 2023.”

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For the full year, Starbucks’ consolidated net revenues were up 11%, or 13% on a 52-week basis, to a record $32.3 billion. Global comparable store sales increased 8%, driven by a 5% increase in average ticket and a 2% increase in comparable transactions.

 U.S. comparable store sales increased 12%, driven by an 8% increase in average ticket and a 4% increase in comparable transactions.

For fiscal 2023, Starbucks is projecting revenue growth of 10% to 12%, even with a 3% hit from foreign currency translation. It forecasts global same-store sales growth on the high end of its prior range of 7% to 9%. But the fiscal first quarter is expected to be on the low end of that range amid continued  lockdowns in China.

The company opened 763 net new stores during the quarter. It ended the period with 35,711 stores globally, of which 51% are  company-operated and 49% licensed.

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