Starbucks faces setback in sales falling short of Wall Street’s target at 10% instead of the anticipated 11%

Starbucks recently announced its latest quarterly earnings, impressively exceeding analysts’ earnings expectations. However, the company faced a minor setback in same-store sales, falling short of Wall Street’s target at 10 percent, instead of the anticipated 11 percent.

Despite this, Starbucks managed to outperform analysts’ projections with adjusted earnings per share of $1, surpassing the predicted 95 cents. While the coffee chain slightly raised its outlook for full-year earnings growth, its shares experienced a marginal decline in after-hours trading.

Starbucks’ domestic market remained robust, although it experienced a slight hiccup with same-store sales growth in North America reaching 7 percent, falling short of the expected 8.4 percent.

To cater to its younger, more affluent customers in the United States, Starbucks introduced new beverages and expanded food choices, resulting in increased average customer sales. However, quarterly transactions in North America only grew by 1 percent, significantly lower compared to the 6 percent increase seen in the previous quarter.

In China, Starbucks experienced a remarkable resurgence, witnessing a 46 percent surge in comparable sales during the third quarter. Corporate managers expressed that this rebound aligned with their expectations and is anticipated to continue.

According to BofA Global Research analysts cited by Reuters, Chinese city travel saw a remarkable surge of approximately 128 percent in the third quarter, rebounding to pre-pandemic levels seen in 2019.

During a meeting with investors, Starbucks officials expressed their expectation of ongoing revenue pressure in the fourth quarter, primarily driven by the at-home coffee business. They also anticipate a decrease in pricing trends after several months of price increases.

Furthermore, Starbucks achieved a global comparable sales increase of 10 percent, slightly below analysts’ forecasts of an 11.8 percent rise, according to Refinitiv IBES data. Additionally, same-store sales grew by 24 percent in its overseas business, falling short of the projected 25.7 percent.

Nevertheless, the company managed to enhance its adjusted operating margin to 17.4 percent in the quarter ended on July 2, up from 16.9 percent in the previous year. This improvement was attributed to lower commodity prices, which helped offset the impact of increased investments in pay and worker benefits.