Starbucks earnings beat as China reverses same-store sales declines

Starbucks on Tuesday reported quarterly earnings and revenue that beat analysts’ expectations, fueled by better-than-expected international sales.

In China, the company’s second-largest market, Starbucks saw its same-store sales increase for the first time since Starbucks’ fiscal third quarter in 2021 as customers returned to its cafes following the rollback of the country’s zero Covid policy.

However, shares of the company fell more than 3% in extended trading after executives reaffirmed its full fiscal year outlook.

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

• Earnings per share: 74 cents adjusted vs. 65 cents expected
• Revenue: $8.72 billion vs. $8.4 billion expected

The coffee giant reported fiscal second-quarter net income of $908.3 million, or 79 cents per share, up from $674.5 million, or 58 cents per share, a year earlier.

Excluding items, Starbucks earned 74 cents per share.

Net sales rose 14.2% to $8.72 billion. The company’s same-store sales climbed 11% in the quarter, beating StreetAccount estimates of 7.1%. Both the U.S. and international markets outperformed expectations.

“This is remarkable on any level, but specifically given the seasonality pressures we typically experience in [the second quarter],” CFO Rachel Ruggeri said on the company’s conference call.

U.S. same-store sales jumped 12% as traffic rose an eye-popping 6%. Some restaurant companies, like Outback Steakhouse owner Bloomin’ Brands, have reported shrinking traffic as customers pull back on dining out. Starbucks joins fellow outliers like McDonald’s and Chipotle Mexican Grill, which also saw traffic jump.

The company said its active U.S. loyalty program members increased 15% from the year-ago period to 30.8 million during the quarter ended April 2.

Outside the U.S., the coffee chain’s same-store sales increased 7%. In China, the metric rose 3%. Last quarter, then-CEO Howard Schultz said that the company expected its business in China would recover in the second half of fiscal 2023.

Starbucks reaffirmed its fiscal 2023 outlook, projecting revenue growth of 10% to 12% and adjusted earnings per share growth on the low end of 15% to 20%.

Starbucks opened 464 net new locations during the quarter.