Tuesday, November 24, 2020

Starbucks earnings reached top estimates as sales recover quicker than await in U.S. , China

Sales in the U.S. and China are recovering from the coronavirus pandemic more quickly than expected, helping global same-store sales shrink just 9% on Thursday reported by Starbucks.

The global coffee chain’s sales have been powered up by customers spending more on their Pumpkin Cream Cold Brew and Frappuccino’s, although foot traffic remains down.

The company’s outlook for fiscal 2021 is projecting a faster rebound than expected by analysts.

Starbucks also released an outlook for fiscal 2021, predicting stronger growth than analysts’ forecasts.

Shares of the stock initially rose after the report, but were now down about 1%.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

Earnings per share: 51 cents, adjusted, vs. 31 cents expected – Revenue: $6.2 billion vs. $6.06 billion expected.

Starbucks topped analysts’ earnings and revenue estimates for its fiscal fourth quarter.

Fiscal fourth-quarter net income of $392.6 million, or 33 cents per share, down from $802.9 million, or 67 cents per share, a year earlier was reported by Starbucks.

Excluding items, the coffee chain earned 51 cents per share, beating the 31 cents per share expected by analysts surveyed by Refinitiv.

Net sales dropped 8% to $6.2 billion, topping expectations of $6.06 billion. The company estimates that it lost $1.2 billion in sales because of the coronavirus pandemic. Global same-store sales fell 9%.

While the number of transactions has fallen, customers are spending more on their coffee orders. Executives said that customers are buying more cold beverages and plant-based options, both of which tend to be higher priced, and more upsizing, because customers are choosing to treat themselves.

In the United States, same-store sales fell 9%. Active membership in Starbucks’ U.S. loyalty program rose 10% to 19.3 million people and drove 47% of transactions.

Demand improved throughout the quarter. In September, U.S. same-store sales fell just 4%, bolstered by the return of Pumpkin Spice Lattes.

Coffee rival Dunkin’ reported U.S. same-store sales growth of 0.9% in its latest quarter earlier on Thursday.

Although the chain has thousands fewer cafes than Starbucks, it has benefited from a higher concentration of drive-thru lanes and more bulk orders from customers.

Dunkin’ is in sale talks with Inspire Brands. In China, Starbucks’ second-largest market, the coffee chain’s same-store sales declined by just 3%.

The chain reported that its two largest markets, the U.S. and China, are rebounding from the pandemic more quickly than expected.

Starbucks opened 480 net new cafes during the quarter. In the next fiscal year, it anticipates 1,100 net new stores and $1.9 billion in capital expenditures.

Starbucks expects to earn between $2.70 and $2.90 per share, after adjustments, on revenue of $28 billion to $29 billion in fiscal 2021.

Global same-store sales are expected to grow 18% to 23% for the year, with U.S. same-store sales forecast to increase 17% to 22%. The forecast assumes that U.S. dining rooms will be fully reopened by the end of the fiscal second quarter, when same-store sales are also expected to rebound. China’s same-store sales growth is expected to reach 27% to 32%.

For the fiscal first quarter, the company projects adjusted earnings of 50 cents to 55 cents per share.

The company’s board raised its dividend to 45 cents. While many companies chose to suspend their dividends at the onset of lockdowns, Starbucks chose to keep paying it out to shareholders.

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