Starbucks hit by sales at its 6,100 outlets in China

Analysts said, “the US remains pretty strong, but the China results are obviously well below expectations.” 

The results show that Americans are still absorbing higher prices for Starbucks drinks that Mr Schultz has labelled an “affordable luxury”. 

Starbucks shares slipped on Friday after earlier reporting profit and sales that missed analysts' expectations, as weakness in China weighed on results. Executives predicted a recovery there this year.

Comparable sales of 5% in the quarter to the end of January were below estimates, with the Seattle-based company saying China “materially impacted” performance. Starbucks is betting big on China, but it has proven to be a tough market for the company in recent years as on-and-off Covid restrictions and spikes in cases have hurt mobility.

“In early December, Zero Covid was lifted and Covid infections spiked across China, resulting in a dramatic decline in consumer activity across the country and causing the most severe Covid disruptions any retailer had encountered,” chief executive Howard Schultz said. 

He added Starbucks is seeing a rebound in activity there and is still targeting 9,000 locations in the country by the end of 2025 — up from the current tally of almost 6,100. 

“Compared to what they originally thought, there’s probably a delayed timeline as to when China improves,” Edward Jones analyst Brian Yarbrough said. “The near-term choppiness continues to be somewhat of an issue,” he said. 

He added that “the US remains pretty strong, but the China results are obviously well below expectations.” 

The results show that Americans are still absorbing higher prices for Starbucks drinks that Mr Schultz has labelled an “affordable luxury”. 

Bloomberg