Starbucks’ stock pops after coffee chain crushes estimates, raises forecast

Earnings

Starbucks raised its full-year earnings and revenue forecast Thursday after more customers returned to cafes in the U.S. and China for pricier drinks.

Shares of the company jumped 5.8% in extended trading. The coffee chain’s stock, which has a market value of $110.2 billion, is up 41% so far this year.

“Our two targeted long-term growth markets, the U.S. and China, performed extremely well across a number of measures as a result of our focus on enhancing the customer experience, driving new beverage innovation and accelerating the expansion of our digital customer relationships,” CEO Kevin Johnson said in a statement.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: 78 cents, adjusted, vs. 72 cents expected
  • Revenue: $6.82 billion vs. $6.67 billion expected
  • Global same-store sales growth: 6% vs. 4.0%

Starbucks reported fiscal third-quarter net income of $1.37 billion, or $1.12 per share, up from $852.5 million, or 61 cents per share, a year earlier.

Excluding items, the coffee giant earned 78 cents per share, topping the 72 cents per share expected by analysts surveyed by Refinitiv.

Starbucks raised its full-year forecast for earnings and revenue. It now expects adjusted, or non-GAAP, earnings per share in the range of $2.80 to $2.82, up from a prior range of $2.75 to $2.79 per share. It is also forecasting revenue growth of 7%, on the high end of its prior range of 5% to 7%.

Net sales rose 8% to $6.82 billion, topping expectations of $6.67 billion.

Sales at U.S. stores open at least a year grew by 7%, driven by 3% traffic growth. Analysts were predicting U.S. same-store sales growth of 4.4%. More customers were visiting cafes during all times of the day, including the afternoon. Starbucks has been trying to drive customers to its stores later in the day with promotions like Happy Hour.

Starbucks’ U.S. loyalty program added roughly 400,000 members during the quarter, bringing its total to 17.2 million. The coffee giant revamped the program in April, adding more options for redemption and trying to incentivize customers to join.

And despite concerns about slowing economic growth in China and increased competition from Luckin Coffee, Starbucks reported same-store sales growth of 6% in the country during the quarter, with 3% more transactions. Luckin, which went public on the Nasdaq in May, has faced skepticism from analysts about its ability to reach profitability due to its rapid expansion and deep discounting.

Starbucks opened 442 net new stores in its third quarter. Roughly a third of those new stores are in China, where Luckin is trying to overtake its American competitor by opening new locations at a rapid pace.

The company did cut its forecast for net new stores by 100 locations. It now expects to open 2,000 this year after reducing the number of stores it expects to open in Europe, the Middle East and Africa. Its outlook for new stores in the Americas and China, its two biggest markets, remains unchanged. 

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