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Starbucks’ China Sales Lose Froth Under New Lockdowns

The coffee chain missed estimates on adjusted earnings as wage and commodity inflation contributed to higher operating costs


Starbucks
A barista serves coffee at a Starbucks flagship store in Beijing. Photo: Reuters

 

Starbucks’ earnings in China fell sharply in the holiday quarter from rising costs and renewed Covid-19 lockdown measures that crimped sales.

The coffee chain recorded comparable sales growth of 13% globally but sales in China dropped 14%.

Global growth was due to the restaurant recovery in the US and higher menu prices. But in China, some cities have reimposed pandemic curbs on dine-in service and other activity.

Sales fell 3% across the company’s non-US markets, coming up short against analysts’ forecast for a 0.5% increase.

Starbucks shares fell 4.6% in after-hours trading on Tuesday. Starbucks also missed estimates on adjusted earnings of 72 cents a share, which was 8 cents below Wall Street’s forecast, as wage and commodity inflation contributed to higher operating costs.

Net sales rose 19% to $8.1 billion, while net income rose 31% to $816 million.

Last week, Starbucks said it had entered into a partnership with China’s Meituan that would allow its Chinese customers to order coffee delivery via the super-app’s platform.

The move will expand the US coffee chain’s delivery footprint in China, which has since 2018 used Alibaba Group’s Ele.me as its exclusive delivery partner.

The two companies will also launch a service which will allow Meituan users to make private bookings for tasting of coffees and learning to make them at Starbucks stores, it said.

Starbucks shares fell 4.6% in after-hours trading on Tuesday.

 

  • George Russell, with Reuters

 

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George Russell

George Russell is a freelance writer and editor based in Hong Kong who has lived in Asia since 1996. His work has been published in the Financial Times, The Wall Street Journal, Bloomberg, New York Post, Variety, Forbes and the South China Morning Post.