Starbucks’ second quarter profits increase but sales in China slow

Fresh Covid restrictions in China make dent in Starbucks overall sales | Photo credit: kevser

Starbucks has reported financial results for its 13-week fiscal second quarter, with global comparable store sales having increased by seven percent.

Comparable store sales in North America and US, which increased by 12%, were slightly overshadowed by comparable store sales decreasing by 23% in China, Starbucks’ largest market outside the US, and by eight percent internationally.

Fresh Covid-19 restrictions in China were reported as the primary reason for this, although the prior-year VAT benefit in China is also likely to have continued to impact sales.

Starbucks’ second quarter fiscal 2022 results also show that consolidated net revenues rose by 15% to $7.6bn compared with $6.7bn in the year previous.

In line with analyst expectations, profits for the quarter were $674.5m, up from $659.4m the year previous.

The company has opened 313 net new stores, ending the period with 34,630 stores globally. Of that figure, 51% are company-operated and 49% are licensed. With more than 34,000 stores worldwide, the Seattle-based coffee chain recently outlined a goal to operate 55,000 stores in more than 100 markets worldwide by 2030.

“We are single-mindedly focused on enhancing our core US business through our partner, customer and store experiences. Given record demand and changes in customer behaviour we are accelerating our store growth plans, primarily adding high-returning drive-thru, and accelerating renovation programs so we can better meet demand and serve our customers where they are,” said Howard Schultz, interim CEO, Starbucks.

“The investments we are making in our people and the company will add the capacity we need in our US stores today and position us ahead of the coming growth curve ahead,” Schultz added.

In April, Schultz used his first address as the interim CEO of Starbucks to outline a new staff and community-focused vision for the coffee chain. Schultz has retaken the reigns from Kevin Johnson, who will continue to serve as a Starbucks partner and consultant to the company and Board of Directors through the end of fiscal year 2022.

Following the publication of the fiscal results, Schultz made several investment announcements to “elevate the experience of Starbucks partners and customers”. This includes equipment and technology enhancements, the implementation of credit card/debit card tipping, as well as the introduction of and a new financial stability toolkit benefit.

In the context of a growing unionisation movement at some US stores, Schultz confirmed the return of the Coffee Master and Black Apron programmes, alongside increased pay and training for employees.