starbucks The company’s quarterly same-store sales rose for the first time in nearly two years, according to a report Wednesday, showing that the company’s turnaround strategy is winning over disengaged customers.
The coffee chain’s global same-store sales rose 1% with tailwinds from international markets. U.S. same-store sales were flat in the quarter, but turned positive in September. Wall Street had expected global same-store sales to decline 0.3% and U.S. same-store sales to decline 0.9%.
“This is a big moment for our company. We’re really proud of where we are,” CEO Brian Nicol said Thursday in an interview on CNBC’s “Squawk on the Streets.”
Domestic same-store sales turned positive in September, and the company maintained that momentum through October, Nikkol said in a conference call. But Chief Financial Officer Kathy Smith cautioned analysts against cheering too soon.
“It’s hard to predict an upturn. We have good reason to believe that U.S. owned operations (same-store sales) will increase throughout the year, but we also know that the recovery will not necessarily be linear,” he said.
The stores and logo of the American multinational chain Starbucks Coffee are displayed.
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The company withheld its full-year guidance a year ago and is not expected to release any short-term or long-term guidance until its scheduled investor day in late January.
Starbucks stock fell more than 1% in Thursday morning trading.
Here’s how the company reported for the quarter ending September 28 compared to Wall Street’s expectations, based on a survey of analysts by LSEG.
Earnings per share: 52 cents adjusted, 56 cents expected; Revenue: $9.57 billion, $9.35 billion expected.
The coffee giant reported fourth-quarter fiscal net income attributable to Starbucks of $133.1 million, or 12 cents per share, down from $909.3 million, or 80 cents per share, in the year-ago period.
Excluding restructuring charges, litigation settlements and other items, Starbucks earned 52 cents per share. The company closed 627 stores and laid off about 900 non-retail employees during the quarter as part of its restructuring plan.
In addition to its restructuring plans, Starbucks is also investing heavily in personnel costs, including adding assistant managers at many of its cafes in North America. This quarter, an increase in personnel expenses put pressure on the operating profit margin.
Net sales increased 5% to $9.57 billion.
To restore U.S. sales, Starbucks has focused on improving the in-store experience for customers and reducing service time per order to less than four minutes. At more than 80% of the company’s stores, the average service time is less than four minutes, Mr. Nicol said, even though foot traffic has increased since the chain launched its fall menu.
The company’s marketing efforts have shifted from promotions and limited-time products to emphasizing trendy innovations like coffee and protein-packed cold foam.
This strategy was successful in winning back some US customers. Smith said Starbucks Rewards’ 90-day active members increased 1% both quarter-over-quarter and year-over-year.
Outside of Starbucks’ home market, same-store sales increased 3%, supported by a 6% spike in foot traffic.
In China, the company’s second-largest market, same-store sales rose 2%, helped by a 9% increase in foot traffic. Under pressure at home from domestic competitors offering cheaper drinks, Starbucks has lowered the prices of many iced drinks to win back customers.
The company is also considering selling a stake in its China operations after years of declining sales in a competitive market. Nicol previously told CNBC’s Jim Cramer that the company values its China operations at more than $10 billion.
“Strategically, we have received very strong interest from multiple high-quality partners, all of whom see great value in the Starbucks brand and team,” Nicol said Wednesday. “We expect to retain a significant stake in Starbucks China and remain confident in the region’s long-term growth potential.”
