ii view: Starbucks revenues froth to a quarterly record

Fourth-quarter results to 1 October 

• Revenue up 11% to $9.4 billion
• Adjusted Earnings per share up 31% to $1.06 
• Global comparable store sales up 8%

Chief executive Laxman Narasimhan said:

“We finished our fourth quarter and full fiscal year strong, delivering on the higher end of our full-year guidance. Our Reinvention is moving ahead of schedule, fuelling revenue growth, efficiency and margin expansion. 

“As we enter the current year, in the face of macro uncertainty, we remain confident in the momentum throughout our business and headroom globally. We expect sustained momentum throughout the company for years to come.”

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ii round-up:

Global coffee chain Starbucks Corp (NASDAQ:SBUX) detailed sales and earnings which beat Wall Street forecasts, aided by improved customer numbers and higher prices. 

Fourth-quarter revenue rose 11% year-over-year to a record $9.4 billion, pushing adjusted earnings up by nearly a third to $1.06 per share. That beat analyst estimates of $9.3 billion and 97 US cents per share respectively.  

Shares in the S&P 500 company rose around 10% in post results trading having come into this latest news little changed year-to-date. Both McDonald's Corp (NYSE:MCD) and KFC owner Yum Brands Inc (NYSE:YUM) are also about flat year-to-date, underperforming a 12% gain for the S&P index itself so far in 2023. 

Starbucks global comparable store sales rose 8% year-over-year, pushed higher by a 3% improvement in comparable transactions and a 4% increase in product prices. 

Comparable sales for its home North American market climbed 8% from autumn 2022, while overseas comparable sales for regions including Europe and China grew 5%.  

Starbucks opened 816 net new stores during the quarter, ending the period with 38,038. Accompanying management outlook comments pointed toward same-store sales growth of 5-7% in 2024, down from its long-term forecast of 7-9% growth.

ii view:

Started in 1971 and headquartered in Seattle, Washington, Starbucks today operates in around 80 countries. Across its global store total, around 52% are operated directly and 48% licenced out or franchised. Its home US and China stores account for 43% and 18% of its total store outlets. 

For investors, the uncertain economic outlook including a cost-of-living crisis for its customers cannot be overlooked, and costs generally for businesses remain elevated. Relations between the West and China are now more strained following the Ukraine conflict, while environmental and climate change issues remain firmly on the agenda of big business. 

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To the upside, product price rises have helped offset elevated costs. The company enjoys diversity of geographical region, it continues to open new stores, while the relatively new chief executive and former head of Reckitt Benckiser Group (LSE:RKT) is now attempting to rejuvenate operations under a reinvention programme. 

With the world’s passion for coffee looks to be showing little sign of cooling, corporate numbers heading in the right direction, and potential for some self-help, this iconic company is likely to remain a favourite with investors.

Positives: 

• Diverse geographical footprint
• Achieved record sales

Negatives:

• Elevated costs
• Currency moves can hinder

The average rating of stock market analysts:

Strong hold