Starbucks Corp (NASDAQ:SBUX) shares are expected to rise after it reported record revenue in the past quarter as strong demand in the US offset Covid-related shutdowns in China, but inflation and higher wages hit the bottom line.
The colossal coffee-house chain was able to exceed sales expectations in its 13-week fiscal third quarter ended July 3, 2022, with quarterly revenue at US$8.2bn, beating analysts' estimates of US$8.1bn.
Sales in China, its second-largest market after the US with roughly 2,000 stores operating with Covid restrictions in 50 cities at the end of the quarter, dropped 44% on a same-store basis, leading to international sales declining 18% in the quarter.
Strong US demand made up for the loss, with sales driven largely by higher average order totals, as well as a 1% increase in traffic.
Adjusted earnings per share came in at 84 cents versus the 75 cents expected by Wall Street.
Starbucks reported lower net income of US$912.9mln, resulting in reported EPS of 79 cents, down from US$1.15bn, or 97c per share a year ago, with inflation, higher wages and training costs squeezing profit margins.
Amid growing unionisation of its staff, the company announced a US$1bn investment in wages last year, while commodity prices were higher too.
Guidance for the remainder of this fiscal year remains suspended, but the board announced a dividend of US$0.49 per share.
Since June 2021, the company said it has opened 298 new stores in North America and 1,355 stores overseas.