Starbucks Q4 - China Slows, US Grows

Last week Thursday, Starbucks reported record revenues for the quarter ending 1 January, but increasing costs took their toll on profits. China, the coffee chain's second-largest market, saw transactions drop 28% as a third of its 6 090 stores were shut down at the peak of the latest Covid lockdowns.

Net income was $855 million, up 5% from the previous year, and sales were $8.71 billion, an 8% increase, but slightly lower than analyst predictions due to currency fluctuations.

Global same-store sales were up 5%, but dropped 29% in China, which was worse than expected. In the US, same-store sales were up 10%, helped by price increases that offset higher costs. Starbucks resumed buying back its shares, purchasing 1.9 million shares worth $191.4 million.

The Seattle-based company said it doesn't see a need to discount its products as customers continue to spend extra on drinks. Management is closely monitoring China's reopening and remains committed to investing there and attracting more customers. The Chinese love coffee, just like the rest of the human race.

The chain is undergoing a CEO transition, incoming CEO Laxman Narasimhan is set to take the helm in April. Starbucks is also changing its rewards program later this month, which is expected to boost profits. Finally, the business is testing a partnership with DoorDash for nationwide delivery in the US by March.

We are happy to have Starbucks in our client portfolios. Coffee is good for you, and a good investment too.