Starbucks posts first sales growth in 18 months led by international markets while US sales remain flat and coffee costs pressure profits
STARBUCKS achieved its first quarter of comparable sales growth in a year and a half, driven by international markets.
Global comparable sales increased by 1% during the quarter, marking a turnaround for the coffee chain.
The company’s largest market, the United States, saw flat comparable sales alongside a decline in store visits.
International same-store sales rose by 3%, significantly exceeding analyst estimates of a 1.61% increase.
Chief Executive Officer Brian Niccol described the quarter as marking a turning point for Starbucks’ US operations.
Niccol stated the company would be careful with price increases next year and does not anticipate broad menu price hikes.
Rising coffee bean costs significantly impacted Starbucks’ profit margins during the quarter.
Global arabica bean prices have surged more than 20% this year following a 70% increase throughout 2024.
Supply disruptions from geopolitical volatility and climate issues have driven the price increases.
US President Donald Trump’s 50% tariffs on Brazil, the top coffee grower, have contributed to supply challenges.
These cost pressures, combined with import duties and restructuring expenses, squeezed Starbucks’ operating margins.
The company’s operating income margin fell to 2.9%, down dramatically from 14.4% a year earlier.
Starbucks reported fourth-quarter earnings of 52 cents per share, missing analyst estimates of 56 cents.
The company’s shares declined slightly in extended trading following the earnings release.
Starbucks continues its restructuring efforts, including closing approximately 600 underperforming stores.
The closures include the company’s flagship unionized Seattle roastery location.
Starbucks plans to invest over half a billion dollars in additional labor hours at US company-operated stores.
The company expects to provide financial guidance at an investor event scheduled for January.
In China, Starbucks’ second-largest market, comparable sales increased by 2%.
The company has been lowering prices for non-coffee products in China and offering more local flavours.
Starbucks faces stiff competition from local coffee chains in the Chinese market.
The company remains in a stalemate with the union representing baristas at about 550 US stores.
Both sides claim the other ended negotiations last year and express willingness to resume talks.
Brian Jacobsen, chief economist at Annex Wealth Management, noted Starbucks faces significant competitive and cost pressures.
Restaurant industry consultant John Gordon predicted Starbucks’ recovery will take longer than Wall Street expects. – Reuters
