Starbucks Cuts Earnings Outlook For 2022, Following Airport Cafe Closures
Reduced foot traffic to office buildings and international travel are impacting Starbucks’ same-store sales in China, the company’s second-largest market outside the U.S.
“Our stores that are in airports in the international travel terminals are closed, so clearly that’s weighing on comps,” CEO Kevin Johnson said Wednesday.
“Stores that are in office districts are much slower than they used to be.”
While store locations in residential and commercial zones are continuing to see same-store sales growth, it is not enough to offset the lack of demand at other store locations. Overall, same-store sales in the country were down by 14% in Q1.
Additionally, the company continues to anticipate challenges with supply chain and inflation, prompting it to raise its prices for a third time after raising them in October and January.
The coffee giant’s net sales rose by 19% to $8.05 billion, topping analysts expectations of $7.95 billion. Meanwhile, global same-store sales climbed by 13% in Q1.
Although Starbucks has seen an increase in sales in the U.S. market, it seemingly has a longer road to recovery in China, where the Omicron surge is just starting. To make matters worse, the Chinese government is imposing strict measures to curb the spread ahead of the Winter Olympics, forcing closures when cases spike.
“There’s constant waves of store closures and constraints created by that [policy],” Johnson said.
This has led Starbucks to cut its earnings outlook for fiscal 2022. The company’s stock was down 3% in morning trading following its earnings announcement.
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