Starbucks Fails to Meet Sales Expectations Due to China Setback
Starbucks’ Q1 non-US sales took a hit due to a sharp decrease in Chinese business, which has been impacted by COVID-19-related lockdowns.
As a result, the coffee chain’s shares dropped 3.3% after reporting revenues that were below analyst forecasts and lower profits than expected. In China, comparable store sales were down by 29% YoY and comparable transactions dropped by 28%, as the country’s commerce was limited by COVID restrictions.
Starbucks’ comparable store sales have grown by 5% during this quarter, a decline from the previous quarter’s 7% increase. The main factor contributing to this growth was the rise in the average order price. In North America, comparable store sales rose by 10% due to a 9% increase in the average order price, compensating for the 1% decrease in comparable transactions.
This quarter marks Howard Schultz’s second to last as Starbucks’ interim CEO. He will be succeeded by Laxman Narasimhan, who joined the company in October and has been shadowing Schultz during the transition. Narasimhan is set to take the lead in April.
Despite facing difficult consumer and inflationary conditions worldwide, retail underperformance, and the impact of the Covid-19 pandemic in China, Starbucks still managed to produce impressive results.
The company achieved record revenues of $8.71 billion and a net income of $855 million. According to CEO Howard Schultz, these achievements are a testament to Starbucks’ resilience and strength.