Starbucks Brewed A Good Batch Of Quarterly Earnings

Starbucks Corporation SBUX just reported its fiscal fourth quarter that topped estimates due to the fact that even when being pressured by inflation, its U.S. customers continue to splurge on custom and indulgent coffee drinks. Starbucks joined the trend McDonald’s Corporation MCD and Chipotle Mexican Grill Inc CMG revealed last week with their quarterly reports, showing that even during challenging economic times, consumers find a way to budget in affordable indulgences. But Starbucks could also thank social media platforms such as TikTok and Meta Platforms META-owned Instagram for the hype for custom drinks as even though this was always offered by the coffee giant, social media is to thank for such recipes and flavors going viral.

Quarterly Highlights

For its fiscal fourth quarter, Starbucks reported revenue rose 11.4% to $9.37 billion, topping the $9.28 billion expected from Wall Street. Adjusted earnings per share for the quarter ended on October 1st came in at $1.06, also topping estimates of $0.97. Global same-store sales jumped 8% as ticket size rose 4% with traffic also growing 3%. The coffee giant reported its U.S. customers were willing to spend more on premium seasonal beverages while also adding a record amount of food to their order, fueling an 8% rise in same store sales.

The loyalty company also continued to expand, with U.S. active reward members growing 4% YoY to 32.6 million while China expanded its rewarded members base 22% YoY to 21 million.

Although it topped estimates, Starbucks also told a story of two countries: the U.S. whose consumers continue to splurge on customized coffee beverages and China, whose consumers are tightening their wallets. Although same-store sales in China rose % and traffic increased 8%, the average ticket at its second-biggest market dropped 3%.

Coffee snobs can continue being disgusted at the kind of ‘coffee’ that Starbucks customers choose to drink, but the fact is Starbucks keeps on making a great business out of coffee additions like extra shots, cold foam, oat milk and sugary syrups, even during times of economic uncertainty. Besides the power of affordable indulgence, Starbucks’ results also show to the power of social media due to which consumers tend to spend more on customizing their drinks. But after the bell, Starbucks will be offering updates on its Reinvention Plan it announced in September as part of initiatives to boost its growth by 2025. But, while some like Taco Bell are losing low-income consumers to fast food chains like McDonald’s, Starbucks’ results do not show any change in consumer sentiment as demand for its elaborate coffee drinks remains as strong as ever. 

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