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

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On Thursday, according to the fourth quarter and full-year 2022 financial reports released by the coffee chain Starbucks, the company's fourth-quarter revenue reached $8.4 billion. Global same-store sales increased by 7%, exceeding market expectations. Full-year net revenue grew by 11% to $32.3 billion.

The company stated that this growth was mainly driven by an 11% increase in North American same-store sales, while international same-store sales decreased by 5%, with Chinese same-store sales declining by 16%.

Interim CEO Howard Schultz stated: "The demand for Starbucks coffee accelerated in both the fourth quarter and the full year, proving that the company's reinvention plan has successfully taken its first steps. The reinvention plan will touch and improve every aspect of the Starbucks partner, customer, and store experience, and ideally enable Starbucks to achieve accelerated, sustainable, long-term profitable growth and value creation starting from 2023."

In addition to the company's reinvention plan, the customer loyalty program launched in the U.S. Starbucks region in September this year also contributed to fourth-quarter revenue. The program encourages members of the loyalty program and company partners to earn and purchase digital collectible stamps in the form of NFTs, thereby unlocking exclusive experiences and rewards. The number of active members in the loyalty program increased by 16% in the fourth quarter, reaching 28.7 million.

CNBC (Consumer News and Business Channel) attributes Starbucks' 11% sales growth in the North American market to increased average consumer spending and slightly rising customer traffic, with beverage prices also increasing by 6% compared to 2021.

In response, Starbucks stated that cold beverage sales now account for more than 75% of beverage revenue, with this performance primarily contributed by Generation Z, as young consumers enjoy customizing their drinks and sharing photos on social media.

Therefore, customers are more likely to add expensive syrups to cold drinks, use dairy alternatives, and prefer cold brew products, thereby driving up their prices. However, customers are also purchasing hot coffee beverages. According to Starbucks North America President Sara Trilling, Pumpkin Spice Latte sales increased by 70% compared to the same period last year.

Chinese Market Performance

In the Chinese market, government COVID-19 restrictions continue to pressure Starbucks' international performance. According to StreetAccount data, the company's international same-store sales decreased by 5%, better than the expected 7.1% decline.

Same-store sales in China, Starbucks' second-largest market, declined by 16% this quarter. However, compared to the third quarter revenue, the Chinese market sales revenue achieved consecutive quarterly improvements.

Starbucks China's fourth-quarter net revenue decline significantly narrowed by 29 percentage points from the third quarter's 38% decline, improving to a 9% decline in the current quarter. Same-store transaction volume also recovered from a 43% decline in the third quarter to a 17% decline in the fourth quarter, while same-store average transaction value grew by 1%.

As the domestic epidemic situation has worsened again in recent weeks, Howard expects the uncertainty caused by the recurring pandemic to continue, but also reiterated his long-term confidence in the Chinese business!

Howard stated that the dawn of recovery in the Chinese market in the fourth quarter was exciting for the company. Whether it's innovation, customers' stronger online and offline connection with the brand, or the improvement of epidemic restriction measures, all are reasons for positive sales momentum and continuous improvement in quarter-on-quarter performance.

2023 Financial Outlook

Starbucks CFO provided a forecast for the company's fiscal year 2023 performance, with revenue expected to grow by 10%-12%. Same-store sales in the U.S. market will grow by 7%-9%. For the Chinese market, considering fiscal year 2022 performance and the impact of restrictions, Starbucks China's first-quarter 2023 sales revenue will remain in an unfavorable state, but will subsequently experience significant growth.

Image source: Internet

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