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Starbucks Earnings Heat Up On China Expansion, Digital And Cold Brews

Published on Oct 31 2019 12:28 PM in Restaurant tagged: Starbucks

Starbucks Earnings Heat Up On China Expansion, Digital And Cold Brews

Starbucks Corp has beaten Wall Street sales and revenue estimates, driven by new stores, digital ordering and delivery in China, and cold drinks in the United States.

Total net revenue for the world's largest coffee chain rose 7% to $6.75 billion, higher than the average analyst estimate of $6.68 billion.

Starbucks shares rose nearly 3% after the Seattle-based company also forecast 2020 comparable restaurant sales largely above estimates. Its fiscal year ended September 29.

A year ago, Starbucks announced an organisational restructuring with corporate job cuts and leadership changes, partly to revitalise stagnant sales. Changes have included more focus on digital sales and new beverages.

Starbucks has been fending off competition from niche independent coffee shops in the United States, as well as startups such as Luckin Coffee in China.

To boost sales, Starbucks continued to expand its "Rewards" loyalty program, including access to Happy Hours events.

In China, the program had 10 million active members in the company's fourth quarter, up 45% over the prior year. US membership jumped 15% to 17.6 million.

Chinese consumers are "much more digitally savvy than any other market in the world," CEO Kevin Johnson said.

10% of sales in China are digital - 7% for delivery, and 3% for mobile ordering. That compares to less than 1% of US orders for delivery.

"We do have two very different markets," he said.

Overall, sales at restaurants open for at least 13 months rose 5% in the fourth quarter. Analysts had forecast same-store sales growth of 3.95%, according to IBES data from Refinitiv.

Starbucks estimated fiscal 2020 global comparable store sales would rise 3% to 4%, while analysts had expected a 3.3% increase.

New Stores, Tech And Cold Drinks

Starbucks is planning approximately 2,000 new store openings in 2020, with 600 in the Americas and 1,400 more internationally.

In Chicago, Starbucks plans to open its largest store in the world next month, a "Reserve Roastery," with about 35,000 feet of retail space across five floors.

Another driver for US growth has been cold beverages, including iced teas and coffee, "Refreshers" fruit-flavoured drinks, and Nitro Cold Brew drinks.

Over the summer, Starbucks launched four flavoured creamers under its partnership with Nestle.

In stores, faster new espresso machines will finish rolling out in about the next 12 months with built-in, internet-connected sensors to relay data to a central location about every single espresso shot, allowing managers to know if a machine needs service.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.

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