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Starbucks earnings miss estimates as China sales crater 29%

Starbucks (SBUX) reported quarterly results that mostly missed expectations on Thursday, sending shares down as much as 3% in after-hours trading.

In its fiscal first quarter, Starbucks posted U.S. same-store sales that topped estimates, but its business in China was heavily impacted by the country's outbreak of COVID-19 cases as it reversed its long-standing Zero COVID policy.

Here's what the Seattle-based company reported, compared to Wall Street estimates, according to Bloomberg:

  • Revenue: $8.7B versus $8.75 billion expected

  • Adjusted earnings per share: $0.75 versus $0.77 per share expected

  • U.S. same-store sales: 10% versus 9.26% expected

  • International sales: -13% versus -3.87% expected

  • China sales: -29% versus -13.31% expected

Starbucks interim CEO Howard Schultz said these results reflect "challenging global consumer and inflationary environments, a soft quarter for retail overall and the unprecedented, COVID-related headwinds that unfolded in China in Q1."

Revenue increased 8% to $8.78 billion, only slightly higher than expectations of $8.75 billion. Global same-store sales increased by 5%, driven by a 7% increase in average ticket, but that was offset by a 2% decline in transactions, hinting consumers may be pulling back as inflation remains high.

North America and U.S. same-store sales increased by 10%, driven by a 9% increase in average ticket and a 1% increase in comparable transactions.

In its North America business, Starbucks reported margins fell to 18.5% in its first quarter, down from 18.9% a year ago, as higher wages, commodity prices, and supply chain challenges weighed on results. Some of these pressures were offset by higher menu prices.

International sales were down 13%, with a decline of 1% in the average ticket and 12% in comparable transactions. Sales in China fell 29%, driven by a 28% decline in comparable transactions and 1% decline in the average ticket.

Despite the headwinds from China, Starbucks reaffirmed its 2023 full year guidance. The U.S. and China now make up 61% of the company's global portfolio.

In its first-quarter, Starbucks opened 459 net new stores, bringing the total stores to 36,170 stores with 51% company-owned locations and 49% licensed.

Analysts will also be looking for updates on the earnings call for changes to Starbucks' reward program, which go into effect February 13. While consumers are unhappy about the change, which makes it more expensive to reach the amount of stars needed for freebies, Wall Street is eager to hear about potential opportunities for higher margins from the change.

In Q1, the 90-day active members in the U.S. Starbucks Rewards loyalty program rose 15% compared to a year ago, reaching 30.4 million members. Members added a record $3.3 billion dollars to accounts during the quarter.

Year-to-date shares of Starbucks are up 9.4%. The company reported its fourth-quarter 2022 fiscal year 2022 results back in November.

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

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