Starbucks (SBUX) shares surged higher Friday after the world's largest coffee chain posted stronger-than-expected fourth quarter earnings Thursday as solid U.S. sales, powered in part by price hikes, offset a prolonged slump in China traffic.
Starbucks said non-GAAP earnings for the three months ending in September, the group's fiscal fourth quarter, fell 19% from last year to 81 cents per share, but firmly beat the Street as revenues rose 3.1% to $8.4 billion.
U.S. comparable sales were up 11% from last year, Starbucks said, as the group introduced 6% price hikes over the past twelve months that customers have been willing to absorb and despite what the group called "elevated pricing actions taken throughout the year," daily store traffic was around 95% of pre-pandemic levels over the months of September.
Comps in China were down 16% amid the country's extended Covid lockdowns, but that rate was notably firmer than the 44% decline over the prior quarter. International comparable sales rose 7%, Starbucks said.
The group also held to its recent 2023 growth forecasts, which sees comparable worldwide sales by between 7% and 9%, as well as its recently-improved profit target, which forecast earnings growth of between 15% and 20% over the next three years, although fiscal 2023 earnings will be at the "low end" of that range.
"We saw strong demand for Starbucks coffee in Q4 and throughout the year in every market and channel in which we operate. We are encouraged by the early signs of recovery we saw in China in Q4, where innovation, increased customer physical and digital engagement with the Starbucks brand and the relaxing of COVID restrictions, drove solid positive sales momentum and sequential quarterly improvement," said interim CEO Howard Schulz.
"The speed with which our business in China accelerated in Q4 and the strong positive correlation between Starbucks revenue growth and the relaxing of COVID mobility restriction reinforces our confidence in Starbucks' long-term growth opportunity in China," he added. "However, we anticipate the current COVID-related uncertainty to continue and repeat that while our long-term aspirations for China remain undiminished, we expect the recovery of our business in the country to be nonlinear."
Starbucks shares were marked 9.7% higher in early Friday trading to change hands at $92.98 each, a move that still leaves the stock down more than 20% for the year.
