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The Covid-19 pandemic has been very brutal to quick-service restaurant businesses, and the Seattle based coffee giant is no exception. Starbucks reported its third quarter numbers showing its steepest per share losses in more than a decade. It was due to slowing sales and increased costs arising from the pandemic. The market celebrated these results with the share price up 6% after the announcement; the worst is over for Starbucks it seems.
Starbucks reported revenues of $4.22 billion, down 38% year-on-year but still beating market expectations. Same-store sales were down a jawdropping 40%, leading to an operating loss of $704 million for the quarter. This was mostly driven by a 51% decrease in comparable transactions but was partially offset by a 23% increase in average ticket prices.
The coffee giant has had to endure the pandemic's blow to their sales in stages, first from China, then across to Europe, and eventually the US. It had to close stores during lockdowns but continued to pay its employees. Starbucks opened 130 new stores to get to a total of 32 180 stores globally where 51% of the stores are company owned and 49% are licensed/franchised. In terms of location, 61% of those stores are in the US and China.
On the 8th of April 2020, Starbucks announced that it launched a $10 million global relief fund to support its employees "facing extreme hardship" because of the pandemic. The money will provide emergency once-off grants to workers at both their company operated and franchised stores.
Starbucks has done something very unique by continuing to pay employees during the pandemic and allowing those with Covid anxiety to stay home if they weren't comfortable with working during the pandemic. The good news is that 96% of company owned US stores are now open, and all stores are open for pick-up and go services.
The company has done what it can with the hand that it has been dealt and there are lessons to be learnt; not just for us as investors but for other business owners out there. Starbucks showed up for all its stakeholders without compromising anyone's health in the process and that is what we want to see from businesses across the board.
