By
Chimamanda U. Martha
March 20th, 2024
Starbucks revealed a 15% rise in fiscal Q2 2022 revenue amid rising costs of ingredients, lockdowns in China, and employee unionization.
Starbucks Corporation (NASDAQ: SBUX) recently released its fiscal Q2 earnings report for 2022, which showed revenue edging out Wall Street estimates. For the fiscal quarter, the coffee chain realized revenue of $7.64 billion to the consensus estimate of $7.6 billion. Furthermore, the company’s earnings per share of 59 cents adjusted for the same period was on par with analysts’ expectations.
Starbucks also reported a fiscal second-quarter net income of $674.5 million, or 58 cents per share. This figure represents a marked increase from the $659.4 million net income and 56 cents per share recorded a year earlier.
Furthermore, Starbucks shares climbed 5% during the extended trading session, only to give up 0.11% in after-hours trade.
Starbucks Q2 2022 US & China Outing
Besides an encouraging revenue haul and passable earnings for fiscal Q2 2022, Starbucks has been facing increasing costs. Most of these costs are from rising labor and the price of ingredients. In addition, the multinational coffeehouse is also experiencing a COVID drag in China which impacted its international sales. Starbucks’ same-store sales in China plummeted by 23% in the quarter due to reinstituted lockdowns. Interestingly, China is Starbucks’ second-largest market.
Meanwhile, Starbucks’ operational fortunes in the US were much more favorable. For instance, global same-store sales in America grew between 7-12% in the quarter on strong sales growth. In addition, the strong demand for Starbucks products in the US was able to offset the sharp declines from China. Furthermore, US sales also exceeded analysts’ expectations of 6.5% for the fiscal quarter. Notably, sales were not affected by the price increases that Starbucks introduced in the US last December.
Employment & Ingredients Costs
Starbucks also grappled with higher employment costs as well as costs to buy and transport ingredients for the fiscal quarter. The coffee giant’s baristas in the US have clamored for better pay and working conditions. In fact, in the last six months, around 50 Starbucks-owned locations voted in favor of unionizing.
The world’s largest coffeehouse chain might be listening to its workers’ demands since interim CEO Howard Schultz recently returned. In a bid to end the growing union push, Schultz suspended company stock buybacks and instead reiterated an upcoming pay development. Last fall, Starbucks announced a $1 billion investment in US employee wages and benefits.
In addition, the coffee chain also stated back that it would increase pay for its American workforce to no less than $15 per hour this summer. Speaking on Tuesday, Schultz explained that the planned pay increase would provide Starbucks stores with the requisite workers for handling customer demand.
Starbucks Stock
Starbucks stock is currently trading 36% lower than it did at the beginning of the year at $74.25. Furthermore, the prominent coffeehouse’s shares are also underperforming the S&P 500, which is down 12.39% year to date.
Headquartered in Seattle, Washington, Starbucks operates 33,833 stores in 80 countries, with 15,444 in the US.