K-Cups, Expansion In China Drive Growth For Starbucks In The June Quarter
Starbucks Corporation (NASDAQ:SBUX) reported its June quarter results on July 21, 2016, meeting the consensus estimate for EPS, but missing it slightly for revenues. That said, Starbucks saw a significant 7% y-o-y growth in its top-line, undeterred by the industry-wide traffic deceleration and macroeconomic changes that other players in the industry have been suffering from. At 9.7% y-o-y, the channel development segment was one of the biggest contributors to the revenue growth, supported by the growing dollar share of Starbucks Roast and Ground, and Starbucks K-Cup platforms.
Highlights Of The Quarter:
- Down 7% Since 2023, Can Starbucks’ Stock Reverse This Trend Post Q1 Results?
- Down 26% From Its Pre-Inflation Shock High, What Is Next For Starbucks Stock?
- After 6% Drop This Year, Pricing Growth To Bolster Starbucks’ Q4
- Can Starbucks Stock Return To Pre-Inflation Shock Highs?
- Starbucks’ Stock To See Little Movement Past Q3?
- Starbucks Stock To Likely Trade Lower Post Q2
1. Slowdown In The Comps Growth In The Americas
Historically, Starbucks’ levels of comparable store sales growth have been at or above 5%. In a shocking move for the investors, the June quarter saw this metric coming down to 4%, impressive when compared to other players in the quick service restaurant marketplace, but very far from Starbucks’ recent 8%-9% levels. The fall in the metric was primarily seen in the Americas, and is attributable to the shift of Starbucks’ loyalty program from a frequency-based to a spend-based model. However, the company remains confident about this shift, expecting it to be a pivotal point for its business. This stems from the fact that it will likely eliminate in-store operating issues and order splitting, and result in increased speed of service and reduced line attrition.
2. Success Of Cold Brew Coffee
Despite the slowdown in comps in the Americas, revenue grew to 7% y-o-y. This is likely a result of the success of cold brew coffee that Starbucks introduced earlier in the quarter, and the launch of Teavana handcrafted beverages.
3. China To Be A Key Growth Market
China is one of the brightest stars in the Starbucks growth story. The company has almost 2,300 stores in over 100 cities in China, and continues to open more than one store a day. China outshone the other regions in the quarter, by posting 7% comps growth due to increased traffic. Further, China accounts for over 10 million of the 19 million Starbucks Reward members in China and Asia Pacific (CAP). To reinforce China’s growth potential, Starbucks has decided to open up a roastery in Shanghai in 2017.
4. Europe, Middle East, and Africa (EMEA) Remains A Drag
Coming to EMEA, the region with the smallest presence revenue-wise, this was a low point for the company. Some of the factors that contributed to consumer uncertainty and thus, revenue losses in the region, are the slowing European economy, Brexit, a weakened British pound, and ongoing security concerns throughout the region.
Have more questions on Starbucks? See the links below.
- Starbucks Q3 FY 2016 Earnings Preview: Continued Focus On China, Expansion Of The Single-Serve Segment To Drive Results
- Starbucks’ Expansion Plans in China & Digital Channels Drive Growth In Q2 FY 2016
- How Has Starbucks’ Revenue And EBITDA Composition Changed Over 2011-2015?
- By What Percentage Have Starbucks’ Revenues And EBITDA Grown Over The Last Five Years?
- What Is Starbucks’ Revenue & EBITDA Breakdown?
- What’s Starbucks’ Fundamental Value Based On Expected 2016 Results? (Updated After Q2 FY’16)
- Starbucks Q2 FY 2016 Earnings Preview: New Developments In China/Asia Pacific Region To Steal The Limelight
- Where Will Starbucks’ Revenue And EBITDA Growth Come From Over The Next Three Years? (Updated After Q2 FY’16)
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