Starbucks upbeat; posts first U.S. comp sales growth in two years for Q1
Starbucks Corp.'s turnaround appears to be gaining increased momentum.
The coffee giant reported its first quarter of North America and U.S. same-store sales growth in two years in the period ended Dec. 28. North America and U.S. comparable store sales rose 4%, driven by a 3% increase in comparable transactions and a 1% increase in average ticket.
International comparable store sales increased 5%, driven by a 3% increase in comparable transactions and a 2% increase in average ticket. In China, Starbucks’ largest market outside of the U.S., comparable store sales increased 7%, driven by a 5% increase in comparable transactions and a 2% increase in average ticket.
Starbucks is also growing its footprint. During the company’s earnings call, executives said the chain plans to open 650 net locations in its current fiscal year as it works “to rebuild our development pipeline.” The total includes 150 to 175 net new U.S. company-operated cafes and 450 to 500 net new international cafes (with close to half in China).
Starbucks reported first-quarter net income of $293.3 million, or $0.26 per share, down from $780.8 million, or $0.69 per share, in the year-ago period. In addition to costs related to the turnaround, higher coffee prices and tariffs weighed on the company’s margins during the quarter. Adjusted earnings were $.56 per share, missing estimates of $0.59 per share.
Consolidated net revenues increased 6% to $9.92 billion, topping estimates of $9.67 billion.
“Our Q1 results demonstrate our 'Back to Starbucks' strategy is working and we believe we're ahead of schedule,” commented Brian Niccol, chairman and CEO. “It's great to see the sales momentum driven by more customers choosing Starbucks more often, and this is just the beginning.”
In November, Starbucks said it has entered into an agreement to form a joint venture with private equity firm Boyu Capital to operate Starbucks retail in China. The deal is valued at $4 billion.
“This partnership will help us expand into more cities, deliver exceptional coffee experiences, create new career opportunities for partners, and strengthen Starbucks’ position as a global brand for long-term growth,” Niccol said on the company’s earnings conference call.
The company opened 128 net new stores during the quarter, ending the period with 41,118 stores. Of the total, 52% are company-operated and 48% are licensed.
