What To Expect From Starbucks’ Q2 2019 Results?

by Trefis Team
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Starbucks (NASDAQ: SBUX), the world’s renowned coffee company, is set to announce its Q2 2019 (ended March 2019) results on April 25, 2019, followed by a conference call with analysts. The market expects the company to report revenue close to $6.31 billion in Q2 2019, which would be an increase of  4.6% on a year-on-year basis. The increase is on the back of the company adding new stores across the globe. Market expectation is for the company to report earnings of $0.56 per share in Q2 2019, marginally better than $0.53 per share in the year-ago period.

We have summarized our key expectations from the earnings announcement in our interactive dashboard – What Has Driven Starbucks’ Revenues & Expenses Over Recent Quarters, And What Can We Expect For Full-Year 2019?  In addition, here is more Consumer Discretionary data.

 

Key Factors That May Impact Future Performance:

Growth in China: China comparable store sales increased 1%, with transactions down 2% in the first quarter of the FY 2019. It continues to remain a long-term growth driver for the company, as its GDP, projected to exceed $15 trillion by 2021, is expected to fuel a massive increase in its middle class. The company is on plan to open a net 600 new stores in China in Fiscal 2019 (1100 net in Asia-Pacific) with the Asia Pacific region gaining 259 net new stores in the quarter. The partnership with Alibaba is expected to boost the delivery sales and give a perfectly unique experience to the customers. The Company faces a competition from Luckin coffee and other domestic rivals in China though the CEO Kevin Johnson is confident that Starbucks will prevail in this competition.

Starbucks Delivers: Starbucks is working with Ele.me (as part of its partnership with Alibaba), China’s leading on-demand food delivery platform with 3 million registered delivery riders, to give its customers the best delivery experience possible. The company has started two ‘Star Kitchens’ within two FRESHIPPO supermarkets in Shanghai and Hangzhou. This makes Starbucks the first retail brand to establish a dedicated back of house presence in FRESHIPPO locations to utilize its distinct fulfillment and delivery capabilities to further reach and better serve customers. In the first quarter the company has started the Starbucks Delivers program in more than 2000 stores in China. The program is already contributing mid-single-digit transaction mix in the key markets of Beijing and Shanghai.

Global Coffee Alliance: Starbucks with Nestlé are moving fast to develop the company’s At-Home coffee portfolio. Starbucks announced that both companies have developed a range of Starbucks-branded products for the Nespresso and Dolce Gusto platforms and Roast & Ground and Whole Bean coffees. The company reaffirmed the launch of these products in traditional CPG and Foodservice channels will take place beginning in the spring of this year.

 

Trefis has an estimate of $66 for Starbucks’ stock. Expectations of growth in China, the delivery model, and the coffee alliance are expected to improve profitability.

 

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