Starbucks stock fails to retain gains following an upbeat Q4 earnings report

Starbucks stock fails to retain gains following an upbeat Q4 earnings report

  • Starbucks beat analysts' forecast for revenue in the fourth quarter of 2019.
  • Earnings per share (adjusted) posted in line with the analysts' estimates.
  • U.S and China reported having attracted a greater number of customers in Q4.
  • Stock gained 2% in after-hours trading on Wednesday but lost much of the gains on Thursday.

Starbucks announced its long-awaited quarterly earnings report on Wednesday after the market close. The coffeehouse chain printed better than expected results with a significant increase in customers in the U.S and China, as per the report.

Beating the analysts forecast for revenue, the share prices were seen trading 2% higher in the after-hours trading on Wednesday.

Following the release of the earnings report for the fourth quarter, Kevin Johnson, the Chief Executive of the American coffee company stated in an interview:

“Our U.S. business delivered 6% comparable-store sales growth in the fourth quarter, while China grew comparable-store sales by 5% and total transactions by 13%”.

Revenue And Earnings Per Share Noted In Q4

As per the analysts’ forecast, Starbucks was expected to generate a revenue of $6.68 billion in the fourth quarter. The estimate for earnings per share (EPS) was highlighted at 70 cents per share. According to the Q4 earnings report, however, the coffee company has beaten the forecast for revenue by 7%, printing $6.75 billion in revenue. The figure for EPS, on the other hand, was in line with the analysts’ forecast, noted at 70 cents per share (adjusted).

The report further accentuated the growth in global same-store sales. Against the experts’ forecast of 4% growth, the global same-store sales marked a higher 5% growth instead. Both of the company’s major markets, the U.S and China have been highlighted to have attracted more customers in the fourth quarter. The improved sales have been largely attributed to Starbucks’ unfettered commitment towards employee satisfaction that directly translated into a better customer experience at large, as per the officials.

Starbucks Partnered With Alibaba For Delivery Service In China

Starbucks recently partnered with Alibaba to improve delivery service in China. The Q4 earnings report directed that the partnership caused a 7% increase in sales in China. Starbucks has also declared that it has launched as many as 600 new cafes in China in 2019, that have contributed to higher sales in the region.

Compared to last year, the net income for the American coffeehouse chain in the fourth quarter has climbed up to $802.9 million from $755.8 million. EPS for the same quarter last year hung lower at 56 cents per share versus 70 cents per share (adjusted) for Q4 of 2019.

Chief Executive Johnson also commented in an interview that Starbucks can be expected to make a sizable investment of $1.8 billion in capital expenditures in the future.

As of Thursday, however, much of the gains of late Wednesday have been lost and the Starbucks’ stock is currently trading at $83.78 level, that is lower than the previous close of $84.19 at the end of the regular session on Wednesday.

By Michael Harris
Specialising in economics by academia, with a passion for financial trading, Michael Harris has been a regular contributor to Invezz. His passion has given him first hand experience of trading, while his writing means he understands the market forces and wider regulation.

Investing is speculative. When investing your capital is at risk. This site is not intended for use in jurisdictions in which the trading or investments described are prohibited and should only be used by such persons and in such ways as are legally permitted. Your investment may not qualify for investor protection in your country or state of residence, so please conduct your own due diligence. This website is free for you to use but we may receive commission from the companies we feature on this site. Click here for more information.