Starbucks Corp. beat Wall Street expectations for quarterly comparable sales and profitability on Thursday, claiming that by offering specialised cold drinks through its rewards app to expand its ranks of younger, wealthier clients, it will be able to weather any impending recession.
The demand for more expensive drinks in North America remained strong, and decreases in China's fourth quarter, which concluded on October 2, weren't as bad as anticipated. According to Refinitiv IBES, earnings came in at $0.81 per share, beating analyst projections of $0.72.
In after-hours trading, the Seattle-based company's shares increased by nearly 2%.
Interim CEO Howard Schultz stated on an earnings call with investors that younger customers, or Gen Z customers, tend to have significantly more discretionary money at their disposal, and their loyalty to Starbucks has been fairly large and predictable.
Gen Z and millennials make up more than half of the company's US clientele.Given the deteriorating economic climate, some analysts and investors have questioned how Starbucks will be able to reach its global sales target of 7% to 9% growth for 2023.
"We're highly concerned and humbled by the environment," Schultz said. "But we feel that we've got the resources and the know-how, the history and the innovation to produce the kind of numbers that we feel very confident about."
According to him, it will also be able to survive with the support of fresh product launches and a variety of innovative store layouts, such as drive-throughs and carry-out counters.
The company's comparable sales in the US increased by 11% in the third quarter, helped in part by the renowned Pumpkin Spice Latte's return, which, according to analysts at Credit Suisse, led to the busiest sales week in Starbucks' history.
The increase assisted Starbucks in reducing the blow from a 16% drop in comparable sales in China, its fastest-growing market, where it continues to struggle with a zero-COVID policy that has closed its seated areas.
Starbucks' comparable sales in China were predicted to decline by 20% by Wall Street experts, according to analysts at Gordon Haskett. When compared to the prior quarter, the corporation had reported a 44% decline.
On April 1, Schultz is expected to step down, and Laxman Narasimhan will take over.
Starbucks's global comparable sales increased by 7% in the fourth quarter that ended on October 2, compared to analysts' average expectation of a 4.2 % increase.