Starbucks misses expectations as China drags down international sales

Starbucks on Thursday reported quarterly earnings and revenue that fell short of analysts’ expectations as weak international demand weighed on its results.

In China, the company’s second-largest market, transactions at cafes open at least 13 months plunged 28%. During the quarter, the Chinese government relaxed its zero Covid policy, which led to new outbreaks of the virus.

Despite weak performance in China, CFO Rachel Ruggeri reiterated the company’s fiscal 2023 outlook. The company said it would discuss its forecast further on the conference call.

Shares of the company fell more than 3% in extended trading.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: 75 cents adjusted vs. 77 cents expected
• Revenue: $8.71 billion vs. $8.78 billion expected

The coffee giant reported fiscal first-quarter net income of $855.2 million, or 74 cents per share, up from $815.9 million, or 69 cents per share, a year earlier.

Excluding restructuring and impairment costs and other items, Starbucks earned 75 cents per share.

Net sales rose 8% to $8.71 billion. Globally, its same-store sales rose 5%, driven by a 7% increase in average transaction spend.

In the U.S., Starbucks saw same-store sales growth of 10%, thanks to customers spending more and a 1% bump to traffic.

But outside its home market, Starbucks’ same-store sales shrank 13%, dragged down by China’s dismal performance.

Read the full Starbucks earnings report.