Starbucks Corp NASDAQ:SBUX Earnings Model Download today, plug in your own assumptions, and see the impact on earnings

Starbucks is more relevant globally today than ever before in our history, ideally positioning us to successfully execute our ambitious growth agenda and have roughly 45,000 stores delivering best-in-class returns around the world by the end of fiscal 2025. On today’s call, I will highlight the drivers of our performance in Q1 and provide an update on the progress of our reinvention initiatives. I will then provide granular details specifically around the shape of our business in China and shine a bright light on the positive correlation between increases in consumer activity in China and the recovery of our business. Next, Brady will detail the beverage, food, mobile, digital, and store innovation that drove record demand for Starbucks Coffee in every market outside of China in Q1. At-home coffee and in Q1 outpaced dollar sales growth in North America ready-to-drink category overall, again demonstrating the unique power of the Starbucks brand. In China, Starbucks received the ready-to-drink new product launch of the Year award for the introduction of Bottled Frappuccino Oat Latte.

The company believes the business will have 55,000 locations worldwide by 2030. The important question here is can the brand continue to expand since it is already ubiquitous? The coffee giant’s management could likely be overly optimistic about its long-term expansion prospects.

Starbucks – SBUX Earnings Date, Estimates & Call Transcripts

If we just look at this past year, our SR membership base grew 15% in the U.S. and globally, we’re seeing significant growth across our different markets as well. So we see not only that, but it’s about 56% of transactions in the quarter. But on the ground here, I’m happy to report that people are going back to work at their offices. You see atlantic city international airport foot traffic recovering and ramping up in commercial areas. You see people going back to cinemas to watch movies, and there’s just a lot more social activities and gatherings, right, starting to and domestic trips and now starting with international as well. So — but most importantly, we’re seeing customers coming back to our stores.

Next, our Q1 performance serves as proof point that we are progressing nicely against our strategy, inclusive of our reinvention plan, and delivering the results we projected. Now before I close, I want to express my sincere gratitude for the hard work of our Starbucks Green Apron partners across the globe, including those in China who serve our customers in a way that only Starbucks knows how. The revenue growth was driven by sustained momentum across all major markets outside of China as well as an 8% increase in total store count over the past 12 months. The growth was partially offset by a 13% decline in comparable store sales, including a 29% decline in China. Although China posted a comp decline of 29% in Q1, the heaviest decline of 42% was experienced in December with pressure carrying into Q2, all of which was well below our original estimates, as mentioned in my opening. Just to give you a little color, at its peak, nearly 1,800 stores or close to 30% of our portfolio were temporarily closed due to sharp fall in traffic and labor shortage because of partners falling sick to COVID.

Lastly, our guidance reflects the latest projection of foreign currency translation with approximate two and three percentage point unfavorable impact on fiscal 2023 revenue and earnings growth, respectively. Company-operated stores reached a record high in Q1, exceeding the prior record set in Q4 of fiscal ’22. This is — this next line, I think, is just — even when I read it, I’m surprised, with eight of the 10 highest sales days in our history recorded in the quarter. Consistently strong demand drove revenues up 14% to a quarterly record of $6.6 billion and a comp sale of 10% over last year.

Quarterly Numbers

The Zacks Industry Rank assigns a rating to each of the 265 X Industries based on their average Zacks Rank. This presentation contains forward-looking statements. You have already added five stocks to your watchlist. Upgrade to MarketBeat Daily Premium to add more stocks to your watchlist.

Starbucks said Thursday that the company resumed repurchasing its shares last quarter, buying 1.9 million shares of stock valued at $191.4 million. Mr. Schultz suspended share repurchases last year, saying Starbucks needed to revest cash back into its business. And if I would just add, we continue to believe that channel development will be a mid-40s margin business, which is really strong, and that’s what helps us in terms of being able to reaffirm our guidance on a full year basis. The one thing I would add, just to finalize your question is that the Siren system is expected to be more of a ’24, ’25 implementation rollout. So we’ll start to see the returns there, which are part of what drove our growth ambitions over the longer term is supported by further equipment rollout in terms of that level of efficiency and productivity.

So our U.S. company operated as well as our U.S. license. So as we start to move along our reinvention plan, it’s going to help us increase that capacity while creating a better experience for our partners https://day-trading.info/ and our customers. So that gives us a lot of confidence that our growth objectives and our ambitions for this year and beyond are well suited. Let me start with that — Thanks, Jeff, for the question.

If a user or application submits more than 10 requests per second, further requests from the IP address may be limited for a brief period. Once the rate of requests has dropped below the threshold for 10 minutes, the user may resume accessing content on SEC.gov. This SEC practice is designed to limit excessive automated searches on SEC.gov and is not intended or expected to impact individuals browsing the SEC.gov website. Going by our Starbucks Valuation, with an EPS estimate of around $3.45 and a P/E multiple of 29.9x in fiscal 2022, this translates into a price of $103, which is 5% lower than the current market price. The company’s incoming chief executive, Laxman Narasimhan, started at the company last year and is expected to take the helm April 1, when Mr. Schultz is set to step down.

Thanks for taking the question and best wishes to Howard on what’s next. First, talk about any incremental pricing that might be planned for fiscal ’23, particularly in the U.S., given that inflation while moving lower, in aggregate is still pretty sticky. So we see a lot of headroom and relevance for the program. Part of that was accelerated with our launch of for everyone a couple of years ago when we lowered the barrier and complexity to enter the program.

Starbucks earnings miss estimates as China sales crater 29%

Shares of the company fell more than 1% in extended trading. The industry with the best average Zacks Rank would be considered the top industry , which would place it in the top 1% of Zacks Ranked Industries. The industry with the worst average Zacks Rank would place in the bottom 1%. An industry with a larger percentage of Zacks Rank #1’s and #2’s will have a better average Zacks Rank than one with a larger percentage of Zacks Rank #4’s and #5’s.

As a result, comps in Q1 declined 29% with a 42% comp decline in December alone. But like consumers everywhere, our customers in China are creating a full return to familiar pre-COVID routines and lifestyles and huge consumer demand in China is waiting to be unleashed. We saw the strongest level of sustained customer activity we’ve seen in years in the run-up to and during Chinese New Year festivities. All numbers referenced on today’s call are on a non-GAAP basis unless otherwise noted or there is no non-GAAP adjustment related to the metric. For non-GAAP financial measures mentioned in today’s call, please refer to the earnings release and our website at investor.starbucks.com to find reconciliations of those non-GAAP measures to their corresponding GAAP measures. This call is being webcast, and an archive of the webcast will be available on our website through Friday, March 3rd, 2023.

Barchart Technical Opinion

We’ve seen this pattern repeat in markets around the world, including the United States. We continued to roll out Starbucks Connect enabling licensed stores to offer all Starbucks Mobile Order & Pay and Rewards benefits, expanding the value offering we provide our customers and licensees and enabling us to capture demand across our broader store portfolio. Starbucks Connect is proving to be highly incremental, and we see great upside for it. Cross-functional teams continue to successfully execute against our reinvention initiatives and our reinvention investments are having a measurable positive impact on our business, evidenced by an 8% improvement in U.S.

• Still, Chief Financial Officer Rachel Ruggeri said on the call that «excluding China, we had tremendous growth across markets.» She also said the company’s fiscal 2023 outlook remains unchanged.
• Now before I close, I want to express my sincere gratitude for the hard work of our Starbucks Green Apron partners across the globe, including those in China who serve our customers in a way that only Starbucks knows how.
• Because of the possibility of human or mechanical error by Mergent’s sources, Mergent or others, Mergent does not guarantee the accuracy, adequacy, completeness, timeliness or availability or for the results obtained from the use of such information.
• As the chain believes it has more room to expand its to-go sales.

We’d like to share more about how we work and what drives our day-to-day business. Please declare your traffic by updating your user agent to include company specific information. To allow for equitable access to all users, SEC reserves the right to limit requests originating from undeclared automated tools. Your request has been identified as part of a network of automated tools outside of the acceptable policy and will be managed until action is taken to declare your traffic.

Beverage sales increased 13%, led by our strength in the espresso category, with featured holiday beverages like the Caramel Brulee Latte and sugar cookie almond milk latte contributing to growth. Customized beverages continue to be a differentiator with customers all year long. Modifier sales were up 28% year over year in our U.S.

To see all exchange delays and terms of use please see Barchart’s disclaimer. You can see a list of the companies which are reporting today on TipRanks earnings calendar. You can see which companies are reporting today on our designated earnings calendar. VectorVest advocates buying safe, undervalued stocks, rising in price. As for SBUX, it has poor upside potential, fair safety, and very good timing. Dividend capture strategy is based on SBUX’s historical data.

But just trying to think in the months and quarters ahead, do you expect to see any staffing shortages. Just trying to understand the staffing situation in that market and the ability to meet demand when it does return. We know it leads to more overall dollars in overall volume, but it does change the margin structure. What I’d say, Andrew, is that we do expect to have margin expansion in China, and that will be driven by recovery as well as the growth we’re seeing beyond recovery. But in terms of a margin expectation, we would expect margin to actually be different than what we saw in 2019 as you see the growth in digital. Just to give you an example, in 2019, digital was about 10% of overall sales in the market.

This — my last earnings call is very special for me and a powerful emotional reminder of the intersection of my life at Starbucks. Despite the challenges and the uncertainties of the last three years, Starbucks’ commitment to China and to our partners and business in China has never wavered. Laxman’s immersion continues to go spectacularly well. He and I engage daily as he absorbs more about our company and business and he wins the hearts and minds of Starbucks partners everywhere.

As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company’s SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. So we’re continuing to roll out equipment innovations to help make the work easier for our partners and, of course, drive efficiency and ultimately enable partners to better serve our customers and do it with grace. So in terms of incremental pricing, our comp and our revenue in North America right now, largely in our U.S. business is benefiting from pricing that was taken in back half of last year.

Today, I’ll focus on what we saw in the U.S. this quarter. In addition to the strong customer demand for Starbucks overall, our results benefited from last year’s strategic pricing actions and increased food attached with record sales for both Sous Vide Egg Bites and breakfast sandwiches. We won’t unveil details today, but it will be a game changer, so standby. Many people have asked me if my final earnings call as Starbucks CEO is bitter sweet, it really isn’t. Starbucks business and brand, the quality of our coffee, the relevance of the Starbucks partner, and customer experiences have defined us since our founding in 1971 and have never been better or stronger.

And that was true throughout the pandemic, and it’s true right now. With digital, our digital platforms have been very sticky with customers. And we’re just making those better as you look at things like Odyssey and Reward together. And then earlier in the presentation, Rachel shared about equipment, it’s just making the job more efficient for our partners, unlocking even greater quality and more customization. If we look at share of wallet and spend 56% of our transactions were from our reward members. And just as Belinda said, in China, our U.S. customers see Starbucks as their first choice for coffee with leading affinities.

Additionally, in terms of quarterly shape, operating margin is expected to decline sequentially in Q2, near prior-year level, driven primarily by the COVID-related headwinds in China. We still expect margins to expand in the back half of the year, improving sequentially in Q3 and Q4 as sales leverage, pricing, productivity gains from reinvention as well as recovery in China begin to contribute to positive margin expansion as the year progresses. We continue to expect quarterly EPS shape to roughly mirror the shape of operating margin with a sequential decline in Q2 and a meaningful step up in the second half of the fiscal year. First, our business and our brand are strong and strengthening every day as demonstrated by the record sales in Q1.