US wages and China closures weigh on Starbucks earnings

U.S. wage increases and store closures in China weighed on Starbucks’ profit margins in the three months to July, but Howard Schultz said its quarterly performance showed signs of “early progress” in his bid to revive the coffee chain.

Four months later Schultz is back As interim CEO of a company struggling with inflationary pressures, changing consumer habits and a drive to consolidate in its home market, Starbucks’ fiscal third-quarter earnings fell from 97 cents a share a year earlier to 79 cents, narrowly hitting the 77-cent wall. Analysts on the Street predict

The drop in pretax income from $1.4 billion to $1.19 billion came despite record quarterly revenue of $8.2 billion, up nearly 9% year-over-year.

The period included weeks when China’s zero-covid policy was enforced Starbucks to close stores or reduce services in its second-largest market, leading to a 44% decline in comparable-store sales in a country where it has more than 5,700 branches.

Its North American comparable-store sales rose 9%, however, thanks largely to an 8% increase in spending by the average customer. Operating margins fell in its biggest market, from 24.3% to 22%, as it faced higher commodity and supply chain costs and spent more on wages and training.

“Partners” at nearly 200 Starbucks stores have voted to join the union since December, putting unexpected pressure on company leaders who see it as a benevolent employer.

“We have a clear line of sight about what we need to do to reinvent the company, improve the experiences of our partners and customers, and drive accelerated and profitable growth all over the world,” Schultz said in a statement.

Starbucks did not comment on its expectations for the rest of the year, after suspending guidance earlier this year. Shares rose 1.5% in after-hours trading.

US wages and China closures weigh on Starbucks earnings Source link US wages and China closures weigh on Starbucks earnings

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