Starbucks talks China upside and customization trends on earnings call
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Starbucks (NASDAQ:SBUX) held its earnings call on Tuesday after posting its FQ3 earnings report, which featured a slight revenue miss and $0.05 EPS beat.
CEO Laxman Narasimhan said customization trends at Starbucks (SBUX) is paying off, with modifiers such as cold foam now contributing over $1B in revenue annually. Espresso machines and new warming ovens are now in all U.S. company-operated stores. Narasimhan said the company sees a "significant opportunity" for food and will share more information soon.
Starbucks (SBUX) also highlighted the major recovery in China and the strength of the brand in the nation. China revenue was up 51% year-over-year against a soft comparable that included lockdowns. Looking ahead, the China growth story for the chain is said to still be in the early phase with coffee consumption on the rise. Of note, Starbucks (SBUX) said the rewards program in China is accelerating and the company plans to make significant investments in the region to enhance further digital capabilities.
SBUX also sees the delivery business as a revenue driver in the future after seeing strong uptake in FQ3 and called fueling productivity a strategic priority. SBUX also said it has a clear opportunity to maximize efficiency and effectiveness while reducing waste.
In terms of guidance, Starbucks (SBUX) reiterated its long-term target for revenue growth of 10% to 12% and EPS growth of 15% to 20%. For FY23, revenue growth of 10% to 12% is anticipated, and EPS growth of 16% to 17%.
During FQ3, Starbucks (SBUX) reported global comparable store sales rose 10%. Average ticket was up 4% and transactions were up 5% during the quarter. Comparable sales in North America increased 7% vs. +8.1% consensus, driven by an 6% increase in average ticket and 1% rise in comparable transactions. A higher mix of premium orders helped to boost margins. China comparable store sales increased 46%, driven by a 48% increase in comparable transactions and a 1% decline in average ticket.
Shares of Starbucks (SBUX) were down 0.77% in postmarket trading following a 0.31% dip during the regular session.
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