Starbucks smashes Street’s expectations, share price jumps
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Starbucks smashes Street’s expectations, share price jumps

Coffeehouse kingpin Starbucks, the global leader in the luxury coffee market, smashed Wall Street’s expectations in all areas last week, sending its share price up. Perhaps most importantly, the company saw success in its second-largest market, China, at a time when many investors feared start-ups like Luckin Coffee would mute Starbucks’ prodigious growth in this important region.

Starbucks’ share price is now up 55% so far this year

Starbucks July 31

Source: Yahoo Finance

Starbucks said it adjusted earnings per share came in at 78c, a clear beat against the Street’s predictions of 72c. Additionally, the company saw a huge jump in net income for its third quarter: $1.37 billion against the year-earlier figure of $852.5 million. On the top line, Starbucks also outperformed, returning revenues of $6.82 billion. Analysts had expected to see a figure of $6.67 billion. These strong figures are a direct result of underlying business success. Starbucks reported global same-store sales growth of 6% (consensus estimates was for growth of 4%), and saw identical (6%) growth in China. Moreover, the company also saw 3% more transactions overall in China. That’s a huge success in what is fast becoming a heavily contested (and vitally important) market.

In a statement, the company’s CEO, Kevin Johnson, said: “Our two targeted long-term growth markets, the U.S. and China, performed extremely well across a number of measures as a result of our focus on enhancing the customer experience, driving new beverage innovation and accelerating the expansion of our digital customer relationships.”

Chief operating officer Roz Brewer also added that “we know a lot more about our customers now, and it’s really fuelling what we have in the pipeline for beverage innovation.” Part of this knowledge comes from Starbucks’ wildly successful US loyalty program, which added an impressive 400,000 members throughout the quarter (the total currently stands at 17.2 million). Leveraging this knowledge-base helped Starbucks create a line of cocktail-inspired cold drinks for summer, and is sure to power more innovation in the current quarter.

Disclosure

Dominion holds Starbucks in its Global Trends Managed Fund.


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