SEATTLE — Starbucks reported record revenue Tuesday as higher sales, particularly in China, new store openings and increased store efficiency continued to drive the Seattle-based coffee giant’s growth.
The company’s $9.2 billion revenue in the quarter ending July 2 was up 12% from the same period a year ago, but it fell short of analyst estimates of $9.3 billion, according to FactSet. The increase of its overall same-store sales at 10% also missed estimates of 12%.
Starbucks CEO Laxman Narasimhan, who took over the top executive position in March, said Tuesday the results of the quarter reflect the company’s progress in implementing its reinvention plan — a $450 million strategy announced in September.
“Our strong third-quarter results point to all-around momentum in the business,” Narasimhan said in an investor call.
The gains were partially offset by higher wages and investments related to the reinvention plan, Starbucks said, adding that inflation and supply-chain costs cut into margins in the quarter.
Starbucks’ China business had the strongest third-quarter beverage sales in five years with a sales growth of 46%, according to the company. As China reopens after COVID-19, the sales growth signals an ongoing recovery for one of Starbucks’ most important markets.
“We’re still in our early days in China, one of the largest consumer markets,” Narasimhan said.
In the previous quarter, Starbucks reported $8.7 billion in revenue, an increase of 14% compared with the same quarter last year.
Despite the wages’ impact on revenue, Narasimhan said store productivity increased through improved scheduling and staffing, and the company increased the number of hours for baristas.
“We are focused on meaningful improvements in staffing and scheduling to ensure that we have the right combination of the right partners in the right roles with the right hours to fuel both engagement and productivity,” Narasimhan said. Starbucks calls its employees partners.
Staffing costs may increase with time as Starbucks looks to open more stores globally. Its reinvention plan included 2,000 new U.S. stores between 2023 and 2025.
In the latest quarter, Starbucks opened 588 net new global stores, outpacing the 464 net new locations announced in the previous quarter, bringing the total number of company-operated and licensed stores to 37,222 globally and 17,050 in North America.
The company’s strategy for new stores targets moving into “underpenetrated areas,” including small cities in the U.S., Narasimhan said. He also said there is room for new store formats in big cities.
Narasimhan, a former PepsiCo executive and former chief executive of U.K.-based Lysol-maker Reckitt, said Starbucks is rethinking some of its operations, adding there are opportunities for improvements in automation and developing a supply base that can keep up with Starbucks’ scale and growth plans.
“We will create a portfolio of fewer, more sustainable and less costly hubs while further simplifying operations in our stores,” Narasimhan said in the previous quarter’s earnings call in May.
Starbucks also announced $1.1 billion in profits, or 99 cents per share, up 25% from the same period a year ago.
