Starbucks’ earnings soar thanks to Chinese and US coffee lovers

The coffee chain’s total net revenue rose 8.1 percent to $6.8bn for the third-quarter, surpassing Wall Street estimates.

Starbucks wide shot/Bloomberg/Photographer: Jason Alden
Starbucks has invested significantly to expand in the Asia-Pacific region and its paying off--a fifth of its third-quarter revenue came from sales in China [Jason Alden/Bloomberg]

Starbucks Corporation raised its annual earnings forecast after quarterly same-store sales exceeded Wall Street estimates on Thursday, as the world’s largest coffee chain saw robust demand in the United States and China for its new beverages.

Shares of the Seattle-based company rose nearly six percent to $96.40 after the bell and were on track for a record high after the company posted its biggest same-store sales growth in 12 quarters.

Starbucks has been trying to make its menu more appealing by adding new beverages such as the Dragon drink and Cocoa Cloud Macchiato, while also expanding the delivery side of its business with new partnerships.

Those efforts helped drive a three-percent growth in transactions for the third quarter, with the US and China accounting for a major share of those gains.

“[Traffic is] an area where Starbucks has struggled,” Edward Jones analyst Brian Yarbrough said. “A lot of investors were asking when are you going to see traffic increase … this is a nice quarter in that standpoint.”

The company has been investing heavily in China, which accounts for a fifth of its total revenue, by opening new stores and expanding delivery to cater to increased demand for on-the-go coffee.

The plans are paying off as same-store sales rose five percent in China and the Asia-Pacific region, beating analysts’ estimates of a 3.45 percent rise, according to IBES data from Refinitiv. Same-store sales growth was seven percent in the Americas, above estimates of a 4.43 percent gain.

For fiscal 2019, the company is expecting same-store sales near the higher end of its previous forecast of three-percent to four-percent growth.

It also expects to earn between $2.80 and $2.82 a share in fiscal 2019, compared with its previous forecast of between $2.75 and $2.79.

For the third quarter, sales at restaurants open for at least 13 months rose six percent, beating estimates of 4.04 percent.

Total net revenue rose 8.1 percent to $6.82bn, surpassing the average estimate of $6.68bn.

Excluding one-time items, the company earned 78 cents, six cents more than analysts’ estimate.

Source: Reuters