Starbucks is expected to report its fiscal fourth-quarter earnings on Thursday after market close as the coffee giant navigates higher prices, ongoing unionization efforts, COVID-19 lockdowns in China, and more.
Here’s what Wall Street expects from the Seattle-based company, according to a Bloomberg consensus estimates:
Income: $8.31 billion expected
adj. earnings per share (EPS): $0.72 expected
US Same Store Sales: 7.78% expected
International Sales: -8.23% expected
Chinese Sales: -21.70% expected
With consumers seemingly unbothered by higher prices, Wall Street expects to see an estimated 2 percent increase in revenue year-over-year, according to Bloomberg.
Per the company’s third-quarter report, the company raised prices by about 5% over the past 12 months.
Interim CEO Howard Schultz is confident that the company is positioned to fare well despite recession fears. In the last quarterly earnings call, I emphasized the need to “exceed the expectations of every single customer to understand what it means to take it personal as we did in 2008 during the cataclysmic financial crisis when we managed through that one.”
Nick Seytan of Wedbush noted “what consumer slowdown?” in a recent report. This quarter, Wedbush maintains its above-consensus 8.5% same-store sales growth expectations with a Neutral rating and price target of $92.00.
Into next year, Wedbush expects consumer demand to continue for the coffee chain in the United States following its plans to invest heavily in labor, operating efficiencies, store investments, and technology during its Investor Day in mid-September.
“We continue to expect solid US comp momentum in the near-term based on our strong checks, and as long as a weaker US consumer does not materialize in FY23, view the speed-of-service initiatives, in particular, as game changing, “the note said.
As of Wednesday, November 2, 320 Starbucks locations have conducted unionization ballot counts. Out of those, 257 have voted yes for a union, 57 have voted no, and 6 are challenge-determinative. Of those who voted yes, 246 have been certified, and Starbucks is expected to begin bargaining in good faith with the union.
In a recent note from Cowen, which has an Outperform rating and price target of $104.00, the firm noted that Starbucks’ plans to improve the employee experience was strong, calling it a “bottom’s up collaboration” between Starbucks and its staff, adding that it is “critical as stores being managed by partners with 3+ years of tenure see 13% greater sales volumes and 8% lower turnover.”
On September 12, Starbucks added two new employee benefits, including a savings account with Fidelity and student loan management tools.
Internationally, the coffee giant has aggressive plans to become the leader in coffee, despite COVID-19 lockdowns taking a toll on same-store sales in China. By 2025, it plans to enter 70 more new cities and expand store count by 50% to total 9,000 stores in China. Currently, it has nearly 6,000, per Belinda Wong, Chairwoman of Starbucks China on Investor Day.
Despite a slower-than-expected reopening in China, once reopening efforts are underway Peter Saleh of BTIG (Buy, $110 PT) is optimistic. The firm believes “that an eventual reopening in China could provide meaningful upside to estimates.”
Year-to-date shares of Starbucks are down nearly 28%.
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