Starbucks’ (SBUX) Upbeat Q4 Results And Reiterated FY23 Guidance Highlights Its Brand Loyalty
2:36 pm Friday, November 04th, 2022
Shares of Starbucks (SBUX +7%) are hot today after the global coffee retailer posted solid upside on its top and bottom lines in Q4 (Sep) while also delivering robust comp growth globally and in the U.S. Although China comps dove by -16% in the quarter, this was a marked improvement from the -44% drop posted in Q3 (Jun). SBUX is also optimistic that after another quarter of negative comp growth in Q1 (Dec), it should see outsized comps throughout the remainder of FY23.
Expectations were slightly elevated leading into SBUX’s Q4 report, as close competitor McDonald’s (MCD) served impressive U.S. and international, ex-China, comp growth in SepQ. Nevertheless, SBUX exceeded this higher bar, underscoring the company’s exceptional brand loyalty and early success with its previously announced investments.
SBUX’s Q3 same-store growth was the star of the show, boasting +7% global and +11% U.S. comps. A continual climb in average ticket was the primary fuel behind the solid comps, although, in the U.S., comparable transactions did see a 1% improvement.
SBUX also expected solid margin expansion globally in FY23, tempered in the first half but accelerating in 3Q23 and 4Q23. This outlook fueled SBUX’s earnings forecast to exceed analyst expectations, a major bright spot, given ongoing FX headwinds and the company’s over $1.0 billion incremental investments planned for the year. FY23 is also expected to continue seeing supply chain and commodity inflation, albeit to a lesser extent than in FY22.
SBUX has been on an impressive run despite the current inflationary environment. Its global footprint and powerful brand recognition are fueling solid comp growth even as it has implemented aggressive pricing actions throughout the past year. Headwinds are still intense, which could knock SBUX off its path toward achieving its long-term financial targets, including +7-9% global comp growth and +15-20% adjusted EPS expansion. However, SBUX has yet to let these challenges encumber its quarterly results, an encouraging sign as it heads into FY23.
