Starbucks Corp.’s stock soared 10% Thursday to lead S&P 500 gainers and put it on track for its biggest one-day gain in more than a year, after the coffee store chain posted better-than-expected earnings for its fiscal fourth quarter.
The last time the stock
SBUX,
rose that much was March 24, 2020, when it climbed 14.7%, according to Dow Jones Market Data.
U.S. customers “continued to favor more premium beverages creating a new normal as it relates to mix and customization,” Chief Financial Officer Rachel Ruggeri told analysts on the company’s earnings call, according to a FactSet transcript.
Average ticket in North America rose 6%, while it was up 5% at international operations.
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Chief Executive Laxman Narasimhan said the company is not seeing a drop in demand for its food and beverages in the current environment.
“We’re not really seeing change in the sentiment in our customer base at this time,” he said, noting that the company is in different shape than it was in 2008, a year that some analysts are warning about, given the more diversified set of channels it participates in.
The company will outline a $3 billion, three-year savings program later Thursday that will mostly come from outside the store in the supply chain, he said.
The company posted net income of $1.219 billion, or $1.06 a share, for the quarter to Oct. 1, up from $878.3 million, or 76 cents a share, in the year-earlier period. Adjusted per-share earnings also came to $1.06, ahead of the 97 cent FactSet consensus.
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Revenue rose 11% to $9.374 billion, also ahead of the $9.290 billion FactSet consensus. Global and North America same-store sales rose 8%, below the 8.2% FactSet consensus.
Starbucks is now expecting same-store sales to grow 5% to 7% in fiscal 2024, Ruggeri told analysts on the call, compared with a FactSet consensus of 6.9%. It expects revenue to grow by 10% to 12%, albeit at the low end of that range, boosted by strength in China and the gains made by its loyalty program.
The company expects global new store growth of about 7%, with about 75% of overall growth coming from outside the U.S. That’s expected to boost the total to nearly 41,000 stores globally by the end of fiscal 2024.
The company expects EPS and adjusted EPS to grow in the 15% to 20% range, while the FactSet consensus estimate is for growth of 14.6%.
Other positives in the quarter include the U.S. loyalty program, which grew 14% to 32.6 million members. China was a bright spot, with revenue up 8% from a year ago.
“Our performance in China improved sequentially quarter-over-quarter with the revenue in the second half of the year 20% higher than the first half, reflecting our growth momentum,” Chief Executive Laxman Narasimhan told the call.
The company opened 326 net new stores in China in the quarter, for 13% growth to a total of more than 6,800 stores by year-end. The company also opened its China Coffee Innovation Park, to make and distribute coffee from its most energy-efficient building, he added.
Wells Fargo analysts said the strong beat, clear momentum and upbeat guidance will likely lead Wall Street to raise estimates.
“Sentiment has improved, but with shares down about 11% post third-quarter earnings, while the S&P has fallen 6%, we view today’s likely re-rating warranted,” they wrote in a note.
Wells Fargo has an overweight rating on the stock, the equivalent of buy.
The stock has gained 2% in the year to date, while the S&P 500
SPX,
has gained 10%.
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