Nasdaq-listed Starbucks Corp sales rose at their slowest pace in a year and earnings missed Wall Street’s estimates as customer sales expanded at a more sluggish pace.
Same-store sales at company-operated locations open for more than a year rose 5% in the company’s 1QFY2024 ended Dec 31, 2023. That is lower than the 6.4% analysts expected, and represents the slowest growth rate since a year earlier, a sign that Starbucks’ momentum may be fading.
While missing on most financial metrics, Starbucks reported same-store sales in North America that were largely in line with expectations, in part to positive store traffic. North America operating margin, a measure of profitability, also beat estimates.
Investors shrugged off the results, suggesting they found reasons for optimism despite the weaker performance. The shares rose 3.2% at 4.50pm in late trading in New York. The stock has lost 13% over the last 12 months, versus a 23% gain in the S&P 500 Index.
Investors had been bracing for a muted report after third-party sales data pointed to a slowdown in the US, weighing on the shares.
Fears of lowered demand, in part due to boycotts in the Middle East over the company’s perceived support of Israel — which Starbucks has repeatedly denied — also damped sentiment. Analysts had already lowered their same-store sales and profits estimates.
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Earnings, excluding some items, were 90 US cents ($1.21) a share, while analysts expected 93 US cents. Net revenue of US$9.4 billion fell short of the US$9.6 billion average forecast.
Adjusted operating margin rose 130 basis points to 15.8%, in part due to higher efficiency in stores. It was partially offset by higher wages and new benefits for workers.
