Starbucks' recent operational enhancements helped the coffee chain meet Wall Street's profit expectations for the quarter, despite a decline in global sales due to continued weak consumer spending in its key markets, the U.S. and China.
The company's shares, which had fallen 22% this year, rose 5% in extended trading after executives reaffirmed the annual forecasts. This year, Starbucks introduced the Siren System plan, which included upgrading equipment to speed up service. The plan was implemented in all U.S. company-operated stores during the reported quarter, with plans to have the new equipment, including updated espresso machines, in less than 10% of its global stores by the end of the year.
"We are focused on what we can control in a consumer environment that can be best described as complex," CEO Laxman Narasimhan stated during a post-earnings call. Starbucks' operating margin decreased by 70 basis points in the third quarter, a smaller sequential drop. The profit of 93 cents per share matched LSEG estimates.
"Quite possibly, investors are viewing this as not as bad as was feared potentially. We're kind of impressed that they were able to open 526 new stores in the quarter," commented Greg Halter, director of research at Carnegie Investment Counsel.
U.S. fast-food chains have introduced limited deals and offers to attract thrifty consumers, who are increasingly cooking at home due to persistent inflation. Starbucks, known for its premium lattes, offered atypical deals over the summer, including a $5 coffee or tea paired with a butter croissant in June and 50% off on Fridays in May.
In China, Starbucks faced weak consumer spending and strong competition from local chains like Luckin' Coffee, in a challenging macroeconomic environment. Same-store sales in China fell 14%, following an 11% drop in the second quarter. Sales in international markets also fell short of expectations, similar to results seen by McDonald's and Domino's.
Starbucks also continued to experience challenges in the Middle East, South Asia, and parts of Europe due to boycotts linked to the war in Gaza. The Seattle-based company reaffirmed its forecast for global and U.S. comparable sales, expecting a low single-digit decline to flat, and annual profit ranging from flat to low-single digits. The company also confirmed that Elliott Investment Management is a shareholder and described ongoing talks with the activist investor as "constructive."
(Sourec:www.business-standard.com)
The company's shares, which had fallen 22% this year, rose 5% in extended trading after executives reaffirmed the annual forecasts. This year, Starbucks introduced the Siren System plan, which included upgrading equipment to speed up service. The plan was implemented in all U.S. company-operated stores during the reported quarter, with plans to have the new equipment, including updated espresso machines, in less than 10% of its global stores by the end of the year.
"We are focused on what we can control in a consumer environment that can be best described as complex," CEO Laxman Narasimhan stated during a post-earnings call. Starbucks' operating margin decreased by 70 basis points in the third quarter, a smaller sequential drop. The profit of 93 cents per share matched LSEG estimates.
"Quite possibly, investors are viewing this as not as bad as was feared potentially. We're kind of impressed that they were able to open 526 new stores in the quarter," commented Greg Halter, director of research at Carnegie Investment Counsel.
U.S. fast-food chains have introduced limited deals and offers to attract thrifty consumers, who are increasingly cooking at home due to persistent inflation. Starbucks, known for its premium lattes, offered atypical deals over the summer, including a $5 coffee or tea paired with a butter croissant in June and 50% off on Fridays in May.
In China, Starbucks faced weak consumer spending and strong competition from local chains like Luckin' Coffee, in a challenging macroeconomic environment. Same-store sales in China fell 14%, following an 11% drop in the second quarter. Sales in international markets also fell short of expectations, similar to results seen by McDonald's and Domino's.
Starbucks also continued to experience challenges in the Middle East, South Asia, and parts of Europe due to boycotts linked to the war in Gaza. The Seattle-based company reaffirmed its forecast for global and U.S. comparable sales, expecting a low single-digit decline to flat, and annual profit ranging from flat to low-single digits. The company also confirmed that Elliott Investment Management is a shareholder and described ongoing talks with the activist investor as "constructive."
(Sourec:www.business-standard.com)
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