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However, net income attributable to Starbucks in the fiscal third quarter was $912.9 million, or 79 cents per share. This is lower than the previous year’s $1.15 billion or 97 cents per share.
Unlike other US food vendors, Starbucks (NASDAQ: SBUX) exceeded analysts’ expectations in its Q3 2022 quarterly earnings, which was mainly fueled by the increased demand for its cold coffee drinks. Meanwhile, McDonald’s (NYSE: MCD) and Chipotle Mexican Grill (NYSE: CMG) are seeing less patronage from low-income consumers. McDonald’s and Chipotle Mexican Grill said increased gas and grocery bills affect the amount consumers are willing to spend. However, Starbucks CEO Howard Schultz said customers of the coffeehouse company are not reducing spending. The CEO gave credit to the company’s pricing power and its customer’s loyalty to keep up with their patronage.
Starbucks revealed in its quarterly earnings report that net sales advanced 9% to $8.15 billion. In addition, global same-store sales were up by 3%, primarily due to stronger performance in the US. In its home market, the company saw a 9% increase in same-store sales. The coffeehouse giant credited a higher average order total and a 1% uptick in traffic for the higher sales. While morning coffee sales reduced due to the pandemic, Starbucks sales more customers are now patronizing in the mornings. Morning sales contribute to about half of its revenue as consumers resume pre-pandemic daily lifestyles.
Demand for Cold Drinks Pushes Starbucks Quarterly Earnings
Notably, demand for cold drinks is on the rise and accounted for three-quarters of the total sales in the quarter. While iced shaken espresso has become popular among customers, Shultz said patrons would rather add syrups, milk, and other modifiers to cold beverages than hot ones. As customers add more modifiers to their drinks, the price of the overall beverage increases. Furthermore, the CEO noted that cold drinks are more popular among its Gen Z customers. Meanwhile, this demographic is a significant percentage of Starbucks patrons. Moreover, Starbucks said in its quarterly earnings report that net sales advanced 9% to $8.15 billion.
In the quarterly earnings, Starbucks also reported adjusted earnings per share at 84 cents, over the expectation of 75 cents. Revenue also came in at $8.15 billion, more than the $8.11 billion expected. On the other hand, net income attributable to Starbucks in the fiscal third quarter was $912.9 million, or 79 cents per share. This is lower than the previous year’s $1.15 billion or 97 cents per share. The company blamed higher wages for baristas and inflation for this quarter’s margins.
According to the quarterly earnings report, Starbucks’ same-store sales outside the US dropped 18% due to lower demand in China. The company attributed the decline to the persisting COVID restrictions in China, its second-largest market. Single-handedly, same-store sales in the country plunged by 44%.
In an after-hours trading session, Starbucks stock is currently up 1.47% to $84.94. The company opened 318 net new locations globally during the last quarter and increased 12.62% in the last three months.