As upstart-rival Luckin’s IPO looms, Starbucks looks strong
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As upstart-rival Luckin’s IPO looms, Starbucks looks strong

Coffee house kingpin Starbucks reported quarterly earnings last week that demonstrated the company is in a strong position. That’s a good thing, as Starbucks’ major new rival in China, Luckin Coffee, is preparing for an Initial Public Offering. That could lead to increased competition in what has become Starbucks’ second most important market. But, based on last week’s release, the company is more than ready to meet it.

Starbucks’ share price has increased by 21% so far this year

29 04 starbucks

Source: Yahoo Finance

For its most recent quarter, Starbucks’ revenue came in at $6.31 billion, meeting the Street’s expectations. It managed to beat on earnings, however, by reporting a figure of 60c per share. Overall same store sales increased by 3%, slightly higher than analysts had hoped to see, and comparable sales in the US rose by 4%, and in China by 3%.

The company’s CEO and president, Kevin Johnson, said in a press release: “Starbucks delivered another quarter of solid operating results, demonstrating that our 'Growth at Scale' agenda is working. We are especially pleased with our comparable store sales growth in our two lead markets, the U.S. and China, where we are also continuing to drive strong new store development with industry-leading returns. With solid first-half financial results, we are on track to deliver on our full-year commitments.”

Starbucks’ “Rewards” loyalty program saw a 13% increase, bringing its membership up to 16.8 million – a positive response to its recent overhaul. It also said that it opened 319 new stores last quarter – 94% of which were in its domestic market of the US. As a result of this strong quarter, the company raised its guidance figure on earnings for fiscal 2019.

Disclosure

Dominion holds Starbucks in its Global Trends Managed Fund.


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