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Starbucks Q1 earnings top Wall Street estimates, but same-store sales hit by COVID resurgence

Brooke DiPalma and Julia La Roche
·4 min read
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Starbucks (SBUX) on Tuesday reported mixed fiscal first quarter results, with the coffee giant posting better-than-expected topline earnings, even as the COVID-19 crisis undermined some of its momentum from 2020.

Here’s what the Seattle-based company reported, compared to Wall Street’s expectations, according to a Bloomberg consensus estimate:

  • Revenue: $6.7 billion versus $6.92 billion expected

  • Adj. earnings per share (EPS): 61 cents versus 55 cents per share expected

  • U.S. same-store sales: -5.0% versus -4.16% expected

  • International same-store sales: -3% versus -1.70% expected

In the earnings release, CEO Kevin Johnson said Starbucks is continuing to show “meaningful, sequential improvements” in its earnings results, despite the coronavirus pandemic’s disruption to its business.

“Investments in our partners, beverage innovation and digital customer relationships continued to fuel our recovery and position Starbucks for long-term, sustainable growth,” Johnson said.

“We remain optimistic about our robust operating outlook for fiscal 2021 as well as our ability to unlock the full potential of Starbucks to create value for our stakeholders,” the CEO added.

For the fiscal first-quarter, consolidated net revenues fell 5% from a year ago to $6.7 billion, underscoring how the return to lockdowns and a tough job market is taking a toll on consumer spending. The company pointed to the impact of COVID-19 “in reduced customer traffic, modified operations, reduced store operating hours and temporary store closures.”

During the quarter, the closely-followed global comparable-store sales dropped 5%, as comparable transactions fell 19%, but the average ticket size jumped by 17%.

In the U.S., same-store sales fell 5%, as comparable transactions declined 21%, but the average ticket size surged by 19%. In China — where the pandemic first originated but was also the first to recover — comparable store sales were up 5%, driven by a 9% increase in average ticket sizes.

Starbucks also shared updated fiscal second-quarter guidance. The company expects comparable store sales in the U.S. between 5 and 10%, while China same-store sales are expected to grow 100%. The company also sees adjusted earnings per share in the range of 45 to 50 cents.

Starbucks also announced that COO and group president Roz Brewer has accepted the CEO role at another publicly-traded company, and will leave Starbucks at the end of February. Brewer’s new post will be announced in the near future, the company added. Earlier this month, Starbucks said its CFO Patrick Grismer will retire on Feb. 1, appointing Rachel Ruggeri as his successor.

Elsewhere in the release, the Starbucks Rewards 90-day active members jumped 15% from a year ago to 21.8 million users in the U.S.

Starbucks opened 278 net new stores, ending the quarter with 32,938 stores worldwide. The company noted that 61% of its global store footprint is located in the U.S. and China, with 15,340 and 4,863 stores, respectively.

Despite many of its core customers working from home as the coronavirus pandemic restricts public life, Starbucks has nevertheless staged an impressive recovery.

Analysts cite the company’s resilience in big international markets like China, and its push to adapt its sprawling network of cushy stores to the realities of social distancing — in part by scaling up on digital and pushing loyalty rewards.

In a research note last week, Morningstar noted that Starbucks was “well positioned for success” because of those factors. “We remain confident that it will meet its 10% annual EPS growth [target],” the firm wrote.

Peter Saleh, an analyst at BTIG, said last month that “while we expect Starbucks to make a full recovery once the vaccine is widely available, we don't see a same-store sales catalyst for the next couple of months.”

However, “we believe investors are looking past this recent weakening to accelerating growth in the second half of fiscal year 2021,” Saleh said — adding that same-store sales in China are expected to rise by 4% to 5% in the fiscal Q1.

Woman hands holding hot Starbucks coffee paper cup, for Christmas and Happy New Year collection. Kunming, China, December 10, 2019
Woman hands holding hot Starbucks coffee paper cup, for Christmas and Happy New Year collection. Kunming, China, December 10, 2019

In a note to clients last week, analyst Christopher Carril of RBC Capital Markets suggested there might be some noise in Starbucks’ results, given the challenge of the comparable year-ago quarter when the virus first emerged. Yet the bank has an “Outperform” rating on shares of Starbucks.

Like many other retail and food/beverage establishments, Starbucks has suffered from a lack of foot traffic during COVID-19. Yet according to data Intelligence platform Placer.ai, visits to the coffee giant have begun trending “sharply in the right direction,” even with fewer commuters entering its stores.

Shares of Starbucks, which soared to new record highs in December, dropped by over 1% in after-market trading, after closing higher at $104.69.

Brooke DiPalma is a producer and reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma.


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