Summary
Starbucks Corporation reported mixed results for the third quarter of fiscal year 2022. Total net revenues increased by 8.7% year-over-year to $8.15 billion, driven by growth in company-operated stores and licensed stores, primarily in North America. However, profitability was impacted by significant headwinds. Operating income decreased by 13.0% to $1.30 billion, and operating margin contracted by 400 basis points to 15.9%. This margin compression was largely attributed to rising commodity and supply chain costs due to inflation, increased partner wages, and sales deleverage in China resulting from COVID-19 related disruptions. The company experienced a notable decline in comparable store sales in China (-44%), significantly impacting the International segment's performance. Conversely, the North America segment showed resilience with a 9% increase in comparable store sales. Despite these challenges, Starbucks is investing in its 'reinvention plan' focused on improving store efficiency and partner/customer experience, signaling a long-term growth strategy. The company also repurchased $4.0 billion in common stock during the first three quarters, though the repurchase program was temporarily suspended in April 2022.
Key Highlights
- 1Consolidated net revenues increased 8.7% to $8.15 billion, driven by North America's strong performance and licensed store growth.
- 2Operating income decreased 13.0% to $1.30 billion, with operating margin contracting by 400 basis points to 15.9% due to inflationary pressures and increased labor costs.
- 3China comparable store sales declined sharply by 44% due to COVID-19 restrictions, impacting the International segment's overall performance.
- 4North America segment demonstrated strength with a 9% increase in comparable store sales, supported by strategic pricing and increased demand for food items.
- 5The company repurchased $4.0 billion of common stock in the first three quarters, though the program was temporarily suspended in April 2022.
- 6Inventories increased significantly by 33% to $2.13 billion, indicating potential supply chain or demand shifts.
- 7Cash and cash equivalents decreased by approximately 50% to $3.18 billion compared to the prior fiscal year end, with $2.8 billion held in foreign subsidiaries.