Starbucks released its latest quarterly earnings reports Tuesday, reporting less-than-expected holiday-season earnings. The company said higher overall costs had weighed heavily on its profits for the period.
The coffee chain operators also downgraded its earnings outlook for its fiscal 2022 as it expects costs to further increase in the coming months. Starbucks CEO Kevin Johnson said during the company's earnings call that he expects higher inflation in the coming quarters. He added that he expects supply chain issues to be a major issue, which may force the company to raise prices once again.
Starbucks initially implemented a price hike in October and then again last month. The company said it had to increase prices given the higher-than-expected costs of materials and labor. It also added that it had incurred costs due to more employees using their sick leaves.
For its latest quarter ended Jan. 2, the company reported total earnings of 72 cents per share on revenues of $8.05 billion. The company's earnings were below the average analysts' estimate of 80 cents per share. Revenue for the period was slightly higher than the $7.95 billion expected and 19% higher than the revenue it reported over the same period last year.
Fiscal first-quarter net income was at $815.9 million, a big jump from the $622.2 million the company reported over the same period last year. Same-store sales in the U.S. grew by 18% when compared to the same period last year. Starbucks reported an increase in membership for its Starbucks Rewards Program, which surged by 21% to 26.4 million over the quarter. The company reported an increase in the purchase of gift cards during the holiday season, stating that shoppers had spent more than $3 billion on its gift cards.
Starbucks' coffee demand was lower outside of the United States. China's lackluster performance drove down international same-store sales, which decreased 3%. Wall Street expected international same-store sales growth to be around 3.3%.
Same-store sales in China, the company's second-largest market, fell by 14% in the third quarter. The drop was attributed to new restrictions imposed by the government following the spread of new Omicron cases in several major cities.
China's recovery might be pushed back much further. China, unlike the U.K. and the U.S., did not detect cases of the omicron strain until early January, and the outbreak is just now beginning.
For its fiscal 2022 outlook, the company said it expects its GAAP earnings per share to drop by around 4% to 6%. Starbucks lowered its adjusted earnings per share expectations from a 10% increase to just 8%.
