What made Starbucks shares slip 5.0% in extended trading?

on Feb 1, 2022
Updated: Feb 2, 2022
  • Starbucks Corp reports mixed results for its fiscal fourth quarter.
  • CEO Johnson blames inflation for lower-than-expected earnings.
  • Shares of the coffeehouse company are down 5.0% after-hours.

Starbucks Corp (NASDAQ: SBUX) on Tuesday said its revenue topped Street expectations in the fiscal first quarter. Shares still slid nearly 5.0% on lower-than-expected earnings. On CNBC’s “Closing Bell”, Wedbush Securities’ Nick Setyan said:

The operating margin miss is the biggest headwind here. They missed operating margin across all three segments. On top of that, they missed the international comp, which shouldn’t be overly surprising given the choppiness we’ve seen internationally, particularly around China.

Important points in Starbucks’ Q4 results

Starbucks reported $815.9 million in net income that translates to 69 cents per share. On an adjusted basis, it earned 72 cents per share versus the year-ago figure of 61 cents. The coffeehouse company noted a 19% YoY growth in revenue.

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According to FactSet, experts had forecast a higher 80 cents of adjusted EPS but a lower $7.98 billion in revenue. In the earnings press release, CEO Kevin Johnson said:

Although demand was strong, this pandemic has not been linear, and the macro environment remains dynamic as we experienced higher-than-expected inflationary pressures, increased costs due to Omicron and a tight labour market.

Active Starbucks® Rewards now has 26.4 million members in the U.S. – up 21% YoY. Global store count hit a record 34,317 as stores in China surpassed 5,500. SBUX is now down 20% for the year.

What else was interesting in the earnings report?

Starbucks noted a 13% annualised increase in its global comparable sales – slightly beating the FactSet consensus for 12.7% growth. Same-store sales in China, however, tanked 14%. The company did not offer guidance for Q2 in the earnings report, but CEO Johnson said:

We remain focused on actions that drive both top and bottom-line growth, including industry-leading investments to attract, train and retain the best talent for our stores as customer occasions increase.

Starbucks is resorting to wage increases at the retail level to retain workforce that will likely weigh on its profit margin that stood at 14.6% in the recent quarter versus 13.5% a year ago. In December, Goldman Sachs added SBUX to its list of “top ideas” in the restaurant space for 2022.

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