Starbucks had a strong holiday season in the U.S., but those results were offset by higher labor and commodity costs and weaker sales in China.
In response, Starbucks lowered its earnings outlook for the 2022 fiscal year, which ends in September. The company said it expects earnings per share to decline by 4% to 6% for the year, a wider range than the 4% decline it previously forecast. It expects adjusted earnings growth of 8% to 10%, down from its previous forecast of at least 10%
Starbucks said it is cutting back on marketing and promotions to help offset its rising costs.
U.S. same-store sales, or sales at stores open at least a year, were up 18% over the October-December period a year ago. The Seattle-based coffee giant said more U.S. customers were visiting at all times of the day and spending more per visit, especially on breakfast and baked goods.
Starbucks raised prices twice — in October and December — to account for higher commodity, transportation and labor costs, but it didn't dampen U.S. customer enthusiasm. More price increases are planned for this year, the company said.
“There is a pent-up demand for Starbucks and for people wanting and longing to return to their normal routines,” Starbucks President and CEO Kevin Johnson said Tuesday during a conference call with investors.
The omicron variant did start to cut into U.S. sales — and limit store hours as more employees called in sick — toward the end of the fiscal first quarter, the company said. Omicron-related staffing shortages at Starbucks' suppliers forced the company to spend more on alternative shipment methods.
COVID also had a significant impact in China, where same-store sales in China fell 14%. Starbucks said 75% of stores in China were closed or had limited hours at the end of December.
Starbucks’ revenue rose 19% to $8.1 billion in its fiscal first quarter. That was ahead of Wall Street’s forecast for revenue of $7.89 billion, according to analysts polled by FactSet. Overall same-store sales growth of 13% was in line with expectations.
But Starbucks fell short of earnings forecasts, and said inflation, continuing pandemic-related costs and rising labor costs were a contributor.
Johnson said Starbucks hired more workers than anticipated during the quarter, which led to higher training costs. Johnson said attracting and retaining workers continues to be a challenge for Starbucks as well as other retailers.
In October, the company said it was raising workers' pay to help ensure a steady workforce. Johnson said Tuesday that $1 billion investment is going forward, and is critical to Starbucks' success. The company said all of its U.S. workers will earn at least $15 — and up to $23 — per hour by this summer. Workers can also get a $200 recruitment bonus to help attract new employees.
But the announcement didn't pacify some workers, who are calling for more say in the way the company's stores are run. Two Starbucks stores in Buffalo, New York, recently became the first Starbucks stores to unionize in decades, setting off a wave of union activity at other stores across the country. As of this week, 54 stores in 19 states have filed for union elections, according to Workers United, the union organizing the effort.
Johnson didn't address the unionization effort Tuesday.
The company reported adjusted earnings of 72 cents per share, lower than the 80 cents analysts were forecasting.
Starbucks shares were down 1% in after-hours trading.
A big-screen adaptation of the anime “Chainsaw Man” has topped the North American box office, beating a Springsteen biopic and “Black Phone 2.” The movie earned $17.25 million in the U.S. and Canada this weekend. “Black Phone 2” fell to second place with $13 million. Two new releases, the rom-com “Regretting You” and “Springsteen — Deliver Me From Nowhere,” earned $12.85 million and $9.1 million, respectively. “Chainsaw Man – The Movie: Reze Arc” is based on the manga series about a demon hunter. It's another win for Sony-owned Crunchyroll, which also released a “Demon Slayer” film last month that debuted to a record $70 million.
The Federal Aviation Administration says flights departing for Los Angeles International Airport were halted briefly due to a staffing shortage at a Southern California air traffic facility. The FAA issued a temporary ground stop at one of the world’s busiest airports on Sunday morning soon after U.S. Transportation Secretary Sean Duffy predicted that travelers would see more flights delayed as the nation’s air traffic controllers work without pay during the federal government shutdown. The hold on planes taking off for LAX lasted an hour and 45 minutes and didn't appear to cause continued problems. The FAA said staffing shortages also delayed planes headed to Washington, Chicago and Newark, New Jersey on Sunday.
Boeing workers at three Midwest plants where military aircraft and weapons are developed have voted to reject the company’s latest contract offer and to continue a strike that started almost three months ago. The strike by about 3,200 machinists at the plants in the Missouri cities of St. Louis and St. Charles, and in Mascoutah, Illinois, is smaller in scale than a walkout last year by 33,000 Boeing workers who assemble commercial jetliners. The president of the International Association of Machinists says Sunday's outcome shows Boeing hasn't adequately addressed wages and retirement benefits. Boeing says Sunday's vote was close with 51% of union members opposing the revised offer.
The stunning indictment that led to the arrest of more than 30 people — including Miami Heat guard Terry Rozier and other NBA figures — has drawn new scrutiny of the booming business of sports betting in the U.S. The multibillion-dollar industry has made it easy for sports fans — and even some players — to wager on everything from the outcome of games to that of a single play with just a few taps of a cellphone. But regulating the rapidly-growing industry has proven to be a challenge. Professional sports leagues’ own role in promoting gambling has also raised eyebrows.
Tesla, the car company run by Elon Musk, reported Wednesday that it sold more vehicles in the past three months after boycotts hit hard earlier this year, but profits still fell sharply. Third-quarter earnings fell to $1.4 billion, from $2.2 billion a year earlier. Excluding charges, per share profit of 50 cents came in below analysts' estimate. Tesla shares fell 3.5% in after-hours trading. Musk said the company's robotaxi service, which is available in Austin, Texas, and San Francisco, will roll out to as many as 10 other metro areas by the end of the year.
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As Big Tech reports Q3 earnings, investors await proof that massive AI and cloud investments from Meta, Apple, Microsoft, and Alphabet are driving real growth.
