Starbucks’ strong US holiday offset by costs, China slump

Feb 1, 2022, 2:47 PM | Updated: Feb 2, 2022, 2:35 am

Starbucks had a strong holiday season in the U.S., but those results were offset by higher labor and commodity costs and weaker sales in China.

In response, Starbucks lowered its earnings outlook for the 2022 fiscal year, which ends in September. The company said it expects earnings per share to decline by 4% to 6% for the year, a wider range than the 4% decline it previously forecast. It expects adjusted earnings growth of 8% to 10%, down from its previous forecast of at least 10%

Starbucks said it is cutting back on marketing and promotions to help offset its rising costs.

U.S. same-store sales, or sales at stores open at least a year, were up 18% over the October-December period a year ago. The Seattle-based coffee giant said more U.S. customers were visiting at all times of the day and spending more per visit, especially on breakfast and baked goods.

Starbucks raised prices twice __ in October and December __ to account for higher commodity, transportation and labor costs, but it didn’t dampen U.S. customer enthusiasm. More price increases are planned for this year, the company said.

“There is a pent-up demand for Starbucks and for people wanting and longing to return to their normal routines,” Starbucks President and CEO Kevin Johnson said Tuesday during a conference call with investors.

The omicron variant did start to cut into U.S. sales __ and limit store hours as more employees called in sick __ toward the end of the fiscal first quarter, the company said. Omicron-related staffing shortages at Starbucks’ suppliers forced the company to spend more on alternative shipment methods.

COVID also had a significant impact in China, where same-store sales in China fell 14%. Starbucks said 75% of stores in China were closed or had limited hours at the end of December.

Starbucks’ revenue rose 19% to $8.1 billion in its fiscal first quarter. That was ahead of Wall Street’s forecast for revenue of $7.89 billion, according to analysts polled by FactSet. Overall same-store sales growth of 13% was in line with expectations.

But Starbucks fell short of earnings forecasts, and said inflation, continuing pandemic-related costs and rising labor costs were a contributor.

Johnson said Starbucks hired more workers than anticipated during the quarter, which led to higher training costs. Johnson said attracting and retaining workers continues to be a challenge for Starbucks as well as other retailers.

In October, the company said it was raising workers’ pay to help ensure a steady workforce. Johnson said Tuesday that $1 billion investment is going forward, and is critical to Starbucks’ success. The company said all of its U.S. workers will earn at least $15 — and up to $23 — per hour by this summer. Workers can also get a $200 recruitment bonus to help attract new employees.

But the announcement didn’t pacify some workers, who are calling for more say in the way the company’s stores are run. Two Starbucks stores in Buffalo, New York, recently became the first Starbucks stores to unionize in decades, setting off a wave of union activity at other stores across the country. As of this week, 54 stores in 19 states have filed for union elections, according to Workers United, the union organizing the effort.

Johnson didn’t address the unionization effort Tuesday.

The company reported adjusted earnings of 72 cents per share, lower than the 80 cents analysts were forecasting.

Starbucks shares were down 1% in after-hours trading.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


Foreign Minister of Egypt Sameh Hassan Shoukry Selim addresses the 77th session of the United Natio...
Associated Press

Live updates: U.N. General Assembly

UNITED NATIONS (AP) — The Latest on the U.N. General Assembly: EGYPT Echoing other developing countries, Egypt’s top diplomat on Saturday implored countries to reform the United Nations, lamented double standards in how the world’s powerful nations deal with crises and expressed concern about growing national debt incurred during the pandemic. Speaking at the annual […]
15 hours ago
A Police officer detains a demonstrator during a protest against a partial mobilization in Moscow, ...
Associated Press

Kremlin stages votes in Ukraine, sees protests in Russia

Hundreds of people were arrested in Russia for protesting a military mobilization order aimed at beefing up the country's troops in Ukraine.
15 hours ago
Andy Huynh, left, and Alex Drueke, far right, are seen hugging their loved ones after arriving at B...
Associated Press

‘We got our miracle’: Freed Americans back home in Alabama

BIRMINGHAM, Ala. (AP) — Two U.S. military veterans who disappeared three months ago while fighting with Ukrainian forces against Russia arrived home to Alabama on Saturday, greeted by hugs, cheers and tears of joy at the state’s main airport. Alex Drueke, 40, and Andy Huynh, 27, had gone missing June 9 in the Kharkiv region […]
15 hours ago
Foreign Minister of Russia Sergey Lavrov addresses the 77th session of the United Nations General A...
Associated Press

On Ukraine, Russia repeats insistence that it had no choice

UNITED NATIONS (AP) — Russia made its case to the world Saturday for its war in Ukraine, repeating a series of grievances about its neighbor and the West to tell the U.N. General Assembly meeting of leaders that Moscow had “no choice” but to take military action. After days of denunciations of Russia at the […]
15 hours ago
Environmental Protection Agency Administrator Michael Regan announces a new federal office of envir...
Associated Press

Biden administration launches environmental justice office

WARRENTON, N.C. (AP) — Forty years after a predominantly Black community in Warren County, North Carolina, rallied against hosting a hazardous waste landfill, President Joe Biden’s top environment official visited what is widely considered the birthplace of the environmental justice movement Saturday to unveil a national office that will distribute $3 billion in block grants […]
15 hours ago
This undated photo provided by the U.S. Defense Department shows Cpl. Joseph J. Puopolo. The solide...
Associated Press

Soldier who went missing during Korean War accounted for

BOSTON (AP) — A soldier from Massachusetts who went missing during the Korean War and was later reported to have died in a prisoner of war camp has been accounted for using modern scientific techniques, military officials said. Army Cpl. Joseph J. Puopolo, 19, of East Boston, was accounted for in August, according to a […]
15 hours ago

Sponsored Articles


Key dates for Arizona sports fans to look forward to this fall

Fall brings new beginnings in different ways for Arizona’s professional sports teams like the Cardinals and Coyotes.
Sanderson Ford

Don’t let rising fuel prices stop you from traveling Arizona this summer

There's no better time to get out on the open road and see what the beautiful state of Arizona has to offer. But if the cost of gas is putting a cloud over your summer vacation plans, let Sanderson Ford help with their wide-range selection of electric vehicles.
Carla Berg, MHS, Deputy Director, Public Health Services, Arizona Department of Health Services

Vaccines are safe if you are pregnant or breastfeeding

Are you pregnant? Do you have a friend or loved one who’s expecting?
Starbucks’ strong US holiday offset by costs, China slump