Starbucks keeps its momentum but feels effects of global turmoil
SEATTLE — Starbucks posted another steamy quarter, slightly beating Wall Street earnings expectations amid big increases in store traffic but narrowly missing sales estimates as the strengthening of the U.S. dollar took out some of the revenue made in foreign markets.
The mammoth Seattlebased coffee purveyor brought home $5.37 billion in sales, up 12 percent from the same period last year, and 46 cents per share in earnings, both record numbers. Analysts had forecast revenues of $5.39 billion and profits of 45 cents per share.
So-called comparable store sales, which measure sales in stores that were open a year ago, jumped an eye-popping 8 percent across Starbucks’ global empire. About half of that increase came from additional store visits.
Chief financial officer Scott Maw said in an interview that the company had a “very strong perfor-
mance globally,” but added that foreign exchange effects had a bigger effect than in previous quarters.
The results show continued momentum for the company, which has bet big on online efforts such as a mobile ordering and payment tool, and reward deals with partners such as Spotify and The New York Times, in order to keep drawing in new customers.
Global picture
But the outcome also shows how turmoil abroad has a rising effect on Starbucks’ increasingly global operations.
At home, things were pretty good: Comp sales in the Americas rose 9 percent, outpacing global growth. But in China-AsiaPacific, the company’s most promising market, sales rose only 5 percent, driven by a 4 percent increase in traffic. That’s down from the red-hot 8 percent increase seen during last year’s holidays.
In Europe, comp sales were up a tepid 1 percent, also much lower than the 4 percent seen last year.
Part of the reason is the strengthening of the U.S. dollar versus foreign currencies as Europe and China deal with economic issues. But political instability also plays a role. Chief operating officer Kevin Johnson said in an interview that the November terrorist attacks in Paris had a chilling effect on traffic for a time.
“In some of Western Europe’s largest cities we saw some declines in transaction during that period,” Johnson said.
This month Starbucks also found itself in the midst of a terrorist attack, when a bomb injured four customers and a security guard at a Starbucks in Jakarta, Indonesia.
Holiday boost
In North America, Starbucks’ home base, the company got a big boost from holiday giving. The company said 1 in 6 American adults received Starbucks gift cards during the holiday quarter, versus 1 in 7 last year. In total, $1.9 billion were loaded onto the cards in the U.S. and Canada, an 18 percent bump.
That revenue is not recognized instantly, only as it’s spent.
But it is a signal of future consumption, and draws new members into Starbucks’ loyalty program as the recipients of these gift cards load them onto their mobile apps.
Active Starbucks rewards customers rose 23 percent to 11.1 million, Johnson said.