Starbucks Releases Latest Financial Report! The Chinese Market Shows Unlimited Potential!

On Thursday, coffee chain Starbucks released its fourth-quarter and full-year 2022 financial reports. Fourth-quarter revenue hit $8.4 billion, with global same-store sales up 7% — ahead of market expectations. Full-year net revenue grew 11% to $32.3 billion.

The company attributed the growth mainly to an 11% rise in North American same-store sales. International same-store sales fell 5%, with China down 16%.

Interim CEO Howard Schultz said: "Demand for Starbucks coffee accelerated in both the fourth quarter and the full year, proving that the first steps of our reinvention plan are working. The reinvention plan will touch and improve every aspect of the partner, customer, and store experience, and ideally enable Starbucks to achieve accelerated, sustainable, long-term profitable growth and value creation starting from 2023."

The reinvention plan was not the only driver. The customer loyalty program launched in the U.S. in September also lifted fourth-quarter revenue. It encourages members and partners to earn and purchase digital collectible stamps in the form of NFTs, unlocking exclusive experiences and rewards. Active loyalty membership grew 16% in the quarter, reaching 28.7 million.

CNBC credits the 11% North American sales growth to higher average spending and slightly rising traffic, with beverage prices also up 6% versus 2021.

Cold beverages now account for more than 75% of beverage revenue, a performance driven largely by Generation Z — young consumers love customizing their drinks and sharing photos on social media.

That means customers are more likely to add premium syrups to cold drinks, opt for dairy alternatives, and choose cold brew, pushing up ticket sizes. Hot coffee is selling too, though: according to Starbucks North America President Sara Trilling, Pumpkin Spice Latte sales rose 70% compared with the same period last year.

Chinese Market Performance

In China, COVID-19 restrictions kept weighing on Starbucks' international performance. According to StreetAccount data, international same-store sales fell 5%, better than the expected 7.1% decline.

Same-store sales in China, Starbucks' second-largest market, dropped 16% for the quarter. Even so, revenue in China improved for a second consecutive quarter.

Starbucks China's fourth-quarter net revenue decline narrowed by 29 percentage points — from 38% in the third quarter to 9%. Same-store transactions recovered from a 43% drop to a 17% drop, while same-store average ticket grew 1%.

With the domestic epidemic worsening again in recent weeks, Howard expects the uncertainty caused by recurring outbreaks to continue, but reiterated his long-term confidence in the Chinese business.

He described the fourth-quarter signs of recovery in China as exciting for the company — whether it was innovation, customers' stronger online and offline connection with the brand, or the easing of restrictions, all were reasons for positive momentum and quarter-on-quarter improvement.

2023 Financial Outlook

Starbucks' CFO forecast 10%-12% revenue growth for fiscal year 2023, with U.S. same-store sales up 7%-9%. For China, given the fiscal 2022 results and the impact of restrictions, first-quarter 2023 sales will remain unfavorable before turning to significant growth later in the year.

FrontStreet Coffee Recommendation

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