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Starbucks stock rises amid a third-quarter earnings beat

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Yahoo Finance food reporter Brooke DiPalma joins the Live show to outline Starbucks' third-quarter earnings report and sales growth.

Video Transcript

- --2 and 1/2%. Brooke DiPalma is here with a full breakdown of those results. Hi there, Brooke. What are you seeing?

BROOKE DIPALMA: That's right. Well, investors seem to be pretty happy with the results here, of course, moving higher in after-market trading. They reported a fiscal third quarter that mostly beat Wall Street expectations. Of course, this report comes as the company navigates inflation pressures, labor costs, unionization efforts, and that big search for a permanent CEO.

So taking a look at the numbers here, earnings per share coming in at $0.84 compared to $0.76, revenue beating, $8.2 billion versus $8.14 billion expected. Now, of course, this is a quarterly record, that $8.2 billion number. And Howard Schultz really happy about that. They said that this Q3 results were announced today demonstrate the early progress we have made in just four short months, of course, of him returning as the interim CEO, despite all these macroeconomic headwinds that are currently going on.

Taking a closer look at the numbers here, US sales jumping 9%, primarily driven by an 8% increase in average ticket size. Meanwhile, that loyalty program still remains hot for them. That's 27.4 million users compared to 13% a year ago, that's up 13%.

But China, the big story here, sales there are down 44%, transactions a 43% decline in comparable transactions, ticket size down 1%. Of course, for 2/3 of the quarter there, COVID took a toll due to closures and that zero-COVID policy, which weighed in heavily on international sales. Those decreased by 18%.

- Yeah, you knew that would be the significant drag on Starbucks earnings, 5,700 plus stores in China. And quite frankly, we're still seeing some lockdowns across China. But Brooke, this is a pretty spectacular report despite of all those headwinds, including Russia as well.

BROOKE DIPALMA: Absolutely. And just to weigh in on that China number, that actually comprises 61% of Starbucks global portfolio. There in China, they have 5,761 stores. Here in the US, though, they have 15,650 stores. And despite all this going on, they did, in fact, open 318 stores this quarter.

So in total, they have roughly 35,000 stores across the globe. To weigh in there, 51% are company operated, 49% license. Of course, now we're seeing those unionization efforts. As of earlier this week, there was nearly about-- I don't know the exact number there, but dozen, hundreds, rather, looking to unionize.

- Terrific stuff. Thank you, Brooke. A great report. Can't help but wonder, Rachelle, if Howard Schultz is going to have to stick around for a while with numbers like this. Just to reiterate, same-store sales in north America up 9%, Rachelle, average ticket up 8% despite inflation and everything we're seeing, recessionary fears as well.

RACHELLE AKUFFO: I mean, Howard Schultz, he seems to be optimistic. In a statement, he said, "We have clear line of sight on what we need to do to reinvent the company, elevate our partner and customer experiences, and drive accelerated profitable growth all around the world." But we have to keep in mind, though, we mentioned some of these headwinds, but also headwinds coming from currency fluctuations. They noted that that also took a bite out of out of their third quarter, their second quarter earnings. They said that there was a 9% adverse impact from foreign currency translation, so something to definitely keep in mind when you have a multinational company with such large exposure, especially in China.