Starbucks sales recover faster than expected in US, China

AP – Starbucks saw faster-than-expected recovery in the United States (US) and China in its fiscal fourth quarter (Q4), giving it confidence as it heads into the new year.

Global same-store sales fell nine per cent from the prior year, a better showing than the 12-17 per cent drop Starbucks anticipated in July. US same-store sales were down nine per cent in the July-September period, while China’s fell three per cent. Starbucks has 20,000 stores in the US and China, or 61 per cent of its total.

Starbucks President and CEO Kevin Johnson said shifts in service — like the introduction of curbside pickup to 800 US stores and growth in delivery and mobile orders in China — kept customers coming despite the disruption in their routines.

In the US, transactions fell 25 per cent, but when customers came, they spent 21 per cent more per order. They bought more food, paid more for plant-based options and treated themselves to larger drinks. The early launch of pumpkin spice-themed drinks in August also fuelled sales.

“Customers crave safe, familiar and convenient experiences,” Johnson said.

During the pandemic, US sales have migrated from cities to suburbs and mornings to late mornings. Weekend sales are outpacing those on weekdays.

Customers walk past a sign that reads ‘We’re Open!’ at a Starbucks Coffee store in south Seattle. PHOTO: AP

In China, new store openings drove sales increases. Johnson said Starbucks opened 260 stores in the July-September period in China, where it now has just over 4,700 stores.

Starbucks said 98 per cent of its company-owned stores are now open. Limited or full lobby seating is now available in 63 per cent of US stores and 90 per cent of stores in China.

Revenue fell eight per cent from the prior year to USD6.2 billion. That was ahead of the USD6.1 billion Wall Street forecast, according to analysts polled by FactSet.

Starbucks net earnings for the fourth quarter fell 51 per cent to USD363 million, or 33 cents per share. Adjusted for non-recurring costs, Starbucks earned 51 cents per share, solidly beating analysts’ forecast of 31 cents.

The company said it expects global same-store sales growth between 18-23 per cent in its 2021 fiscal year. That assumes, in part, that Starbucks’ US cafes will be operating with regular hours and full seating by the end of March.

The company expects full-year consolidated revenue of USD28 billion to USD29 billion for 2021. Starbucks’ full-year net revenue in the 2020 fiscal year was USD23.5 billion, down 11 per cent from the prior year. Starbucks estimated it lost USD5.1 billion in sales due to the pandemic.

Starbucks plans to open 1,100 net new stores globally in 2021, including 600 in China and 50 in the Americas.

In the Americas — made up mostly of US stores — 850 stores are expected to open while 800 will close. Starbucks is accelerating a plan to add more pickup locations in dense cities and focus on mobile ordering and carryout instead of stores with large seating areas.