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Shares of Starbucks Corporation on NASDAQ: SBUX. The stock has gained 10% over the past 12 months. The company posted healthy results for the latest quarter even though its performance was affected by inflationary pressures as well as headwinds related to the pandemic in China. Here are some points to keep in mind if you are looking at this stock:
results
Starbucks generated a combined profit of $8.7 billion in the first quarter of 2023, which is an increase of 8% year over year. Revenue in the North American segment increased 14% YoY to $6.6 billion. The company’s global comparable store sales rose 5% in Q1, driven primarily by a 7% average ticket increase. Comparable store sales in North America and the US increased 10%, supported by average growth of 9%.
However, the company saw revenue in its International segment fall 10% to $1.7 billion, hurt by the impact of FX, as well as a 13% decline in same-store sales due to pandemic-related disruptions in China. Excluding these impacts, revenue increased 25% and comparably increased 11%.
Starbucks also saw comparable transactions fall 2% globally, with a 12% decline in international transactions. Even in North America, comparable transactions only rose 1% in the quarter.
Profit and loss
Starbucks’ GAAP EPS increased 7% to $0.74 in Q1 2023 compared to the year-ago quarter. Adjusted EPS rose 4% to $0.75. Meanwhile, operating margin on a GAAP basis fell to 14.4% in Q1 from 14.6% in the year-ago period, mainly due to investment in wages and benefits, inflationary pressures and sales deleverage in China. Adjusted operating margin also fell to 14.5% from 15.1% last year.
Fleet of stores
Starbucks continues to expand its store fleet. The company opened 459 net new stores during the first quarter of 2023. It ended the quarter with 36,170 stores worldwide, of which 51% were company-operated and 49% licensed.
The North America segment had a total of 17,381 stores in the last quarter, representing 3% new store growth. The International segment ended the quarter with 18,789 stores, representing new store growth of 8%.
At the end of the first quarter, stores in the US and China made up 61% of Starbucks’ global portfolio. The company has 15,952 stores in the US and 6,090 stores in China. Starbucks aims to have 9,000 stores in China by the end of 2025.
Outlook
Starbucks expects to see negative comps in China through the second quarter of 2023, followed by improvement for the remainder of the year. Store growth plans for China remain unchanged as the company continues its strategy of expanding in new cities.
Starbucks expects operating margins to decline in Q2, mainly due to strong winds in China. Margins are anticipated to improve during the latter half of the year with sequential improvements in the third and fourth quarters. Margin expansion is expected to be driven by the impact of sales, pricing, productivity gains, and the recovery in China. Starbucks expects a similar trend for EPS as well with a sequential decline in Q2 followed by a meaningful pick-up during the second half.
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