Starbucks reported mixed results, with strong sales in North America offsetting the hit from China's Covid lockdowns
New York (AFP) - Starbucks reported lower quarterly profits Tuesday despite higher sales, as strong demand and price increases in North America mitigated the hit from Chinese lockdowns.
Executives from the US coffee giant pointed to torrid growth in its home market that helped produce record quarterly revenues, even as operations in its biggest Chinese markets were halted for much of the quarter.
The contrasting performance was starkly apparent in the numbers, with North American comparable sales jumping nine percent, while China’s slumped 44 percent.
Profit for the quarter ending June 27 was $912.9 million, down 21 percent from the year-ago period.
Meanwhile, revenues jumped nine percent to $8.2 billion.
The company’s profit margins in North America declined on higher commodity and labor costs, a trend partially offset by higher prices.
“Starbucks continued to create velocity without any indication of trading down,” interim Starbucks CEO Howard Schultz said Tuesday of consumers’ willingness to absorb price increases.
That boosts confidence in the chain’s ability to weather any downturn, including one that is potentially “significant,” Schultz said.
Starbucks has previously announced plans to spend an additional $1 billion in 2022 on wage increases, training and other store investments as it confronts a unionization campaign that has surfaced at more than 200 US locations.
During a conference call with analysts, Schultz said the company plans more changes following “listening” sessions with employees.
This includes a program that could allow customers to tip Starbucks workers through the smartphone app.
Schultz, who recently pushed back his departure date to March 2023 from fall 2022, said the company had narrowed down the list of CEO candidates to a “select few” as it moves closer to naming a replacement.
He promised to stay on “as long as necessary to ensure a soft landing” for his successor.
Shares rose 1.7 percent to $85.11 in after-hours trading.