Starbucks Corp. (SBUX, Financial) released its first-quarter earnings after the market closed on Jan. 24, topping both earnings and revenue estimates.
The company saw huge gains, particularly from the iced beverage segment, with robust customer demand for Refreshers, iced espresso and iced coffee drinks. Customer spending was high on lattes and Frappuccinos as well.
The Seattle-based coffee chain also reorganized its menu and spent more on promotions during the quarter.
In a statement, CEO Kevin Johnson commented on Starbucks' performance.
"We are particularly pleased with the sequential improvement in quarterly comparable store transactions in the U.S., underpinned by our digital initiatives and improved execution of our in-store experience," he said. "With this solid start to the fiscal year, we are on track to deliver on our full-year commitments."
Key metrics
Starbucks reported adjusted first-quarter earnings of 75 cents per share. Revenue grew 9% year over year to $6.63 billion. Comparable store sales rose 4%, owing to an increase in the average check size.
Segment details
Revenue in the company’s home segment, the U.S., climbed 8% to $4.6 billion. The company opened 807 new stores and same-store sales grew 4%, driven by robust performance of beverages. On the other hand, core beverages, namely espresso, tea and refreshers, registered a combined 3% growth. However, the company had to incur huge restructuring costs, which caused the operating margin to fall to 22%.
In the China-Asia-Pacific region, Starbucks recorded mammoth revenue growth of 45% to $1.2 billion. The company attributed this growth to robust sales from ownership changes in East China, 1,010 new store openings as well as enhanced comparable sales. Same-store sales surged 3% due to a 1% spike in China comps and mid-single-digit comps growth in Japan. In contrast, the operating margin plummeted 530 basis points to 18%.
In the Europe, Middle East and Africa region, revenue dipped 1% to $266.3 million. The company said unfavorable foreign exchange rates offset mounting sales from 324 new stores. While comps declined 1% year over year, the operating margin expanded to 10.1%.
Financial forecast
Starbucks projects fiscal 2019 comps growth between 3% to 4% on the global front. Net income is expected to range from $2.32 to $2.37 per share while adjusted earnings are anticipated to be between $2.68 and $2.73 per share. Revenue guidance is 5% to 7% growth.
Disclosure: I do not hold any positions in the stocks mentioned.
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