Starbucks reported lower-than-expected sales in its fiscal first quarter, hurt by COVID restrictions in China and lower consumer demand in other markets.
Global same-store sales — or sales at stores open at least a year — were up 5% in the October-December period, but that was partly due to higher prices. Store transactions were down 2%. Analysts polled by FactSet had forecast a 6.7% increase in same-store sales.
In the U.S., same-store sales were up 10% as customers spent more per order. And Starbucks noted that its Holiday Red Cup day in November was its highest single sales day of all time despite strikes at more than 100 U.S. stores. But overall U.S. transactions rose just 1%.
Starbucks said its revenue rose 8% to a record $8.7 billion, but that also fell short of analysts’ expectation of $8.79 billion.
Starbucks’ interim CEO Howard Schultz said the quarter was softer for overall retail, which impacted customer traffic. U.S. retail sales slowed more than expected during the holiday season as higher borrowing costs and higher inflation made shoppers pull back.
Schultz also noted the unprecedented situation in China, where same-store sales dropped 28%. The company expects that to turn around as China ends its zero-COVID policy; as of this week, all of Starbucks' stores in China are open without restrictions for the first time since March 2020.
Starbucks said its net income rose 5% to $855 million, or 74 cents per share. That was also lower than the 77 cents analysts had forecast.
Starbucks has been spending heavily in an effort to make its U.S. stores more efficient. The company plans to invest $450 million this year in store improvements, including new workstations that make it simpler to assemble drinks. Employees have been struggling with rising demand for customizable cold drinks in store kitchens designed for simpler hot drinks.
The store revamp is also an attempt to boost employee morale as Starbucks tries to head off a growing unionization movement. At least 274 of Starbucks’ 9,000 company-owned U.S. stores have voted to unionize since 2021.
Starbucks shares fell more than 3% in after-market trading.