Starbucks is in the midst of fire and ice! Same-store sales in China plummeted 44%!

According to the third-quarter results released by coffee chain giant Starbucks on Aug. 2, Starbucks had revenue of $8.15 billion and global same-store sales rose 3%, exceeding market expectations. The company said it was mainly driven by a 9 per cent increase in same-store sales in North America, while international same-store sales fell 18 per cent.

According to figures released by the US Department of Commerce on July 28, US gross domestic product (GDP) fell by an annualised 0.9% in the second quarter, the second consecutive quarter of negative growth. Many retailers and consumer goods companies had issued profit warnings and expected sales to fall in recent weeks. However, the results of coffee giant Starbucks show the opposite.

Starbucks said that even if the cost of living rises, consumers do not reduce or reduce their spending on coffee, but still choose to flock to Starbucks stores to buy fruit tea and iced coffee. The generous spending of consumers contributed to Starbucks' record revenue in the third quarter.

Howard Schultz, interim CEO of Starbucks, said cold drinks accounted for 75% of beverage sales in the third quarter, which was mainly contributed by Generation Z. the reason is that young consumers like to customize their drinks and share them on social media.

Although American consumers have made a great contribution to cold drink sales, the Chinese market is still Starbucks' biggest uncertainty.

Starbucks said on June 3 that its largest market in China, Shanghai, which operates 940 stores, was temporarily closed due to policies related to the local epidemic. Ms. Wang Jingying, chairman of Starbucks China, said that the Chinese market faced the worst damage since the COVID-19 epidemic in the third quarter, and Shanghai Starbucks spent about 2/3 of this quarter under blockade.

The intermittent epidemic caused Starbucks' same-store sales in China to fall 44 per cent in the third quarter, more than the 39 per cent decline expected by intelligence analysts, while Starbucks' revenue in China plunged 40 per cent year-on-year to $540 million in the third quarter.

According to CNN, Starbucks' international sales fell 18% this quarter due to poor performance in China. As Shanghai reopened in early June, its performance gradually improved. Starbucks sees China as one of its most important markets and has previously said it expects most of its future growth to take place in China. The coffee giant is also expected to realize its plan to operate 6000 stores in China by the end of this year.

Nevertheless, the increase in commodity prices and wage-related costs, epidemic-related policy restrictions, as well as exchange rate fluctuations and other factors have a negative impact on Starbucks' overall earnings. Even with the severe decline in China's performance, investors are satisfied with Starbucks' overall performance.

Photo Source: Internet

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