Starbucks, which has always valued the Chinese market, sees the imaginative county as the next "gold nugget".
Editor: Boya
Compiled from the daily economic news, etc
On May 1, Starbucks (SBUX.US) released its financial results for the second quarter of fiscal year 2024 (January 1 to March 31, 2024).
According to the financial report, the company's Q2 revenue was $8.56 billion, down 2% year-on-year, less than the market expectation of $9.13 billion, net profit was $772.4 million, down from $908.3 million in the same period last year, and adjusted earnings per share were $0.68, less than the market expectation of $0.79.
The company's revenue, earnings and same-store sales growth fell short of market expectations due to reduced customer frequency and order size. Chief Executive Officer Laxman Narasimhan called the current "challenging environment" on the earnings call, citing macroeconomic headwinds and consumer pressures as key challenges.
Pictured: Starbucks CEO Nasham
In an effort to boost sales, Starbucks tried a series of new strategies, including afternoon sales and the launch of new products such as lavender lattes, but the results showed that these initiatives did not significantly improve performance. In addition, the company's same-store sales in North America fell by 3%, and footfall and ticket value also showed varying degrees.
Internationally, Starbucks also faced challenges, particularly in China, where same-store sales fell sharply by 11%. Nathhan explained the trend on the call, noting that it was largely impacted by occasional customer declines, changes in holiday patterns, and the normalization of customer behavior following the reopening of markets last year.
Source: The brand's official website
In light of these challenges, Starbucks has revised its growth forecast for 2024 for the third time. The company now expects global revenue growth to be in the low single digits, well below its previous forecast range of 7% to 10%. At the same time, global and U.S. same-store sales are expected to decline or be flat in the low single digits, while same-store sales in China are expected to decline by a single digit.
Starbucks' adjusted earnings per share, revenue and same-store sales growth fell short of expectations compared to previous Wall Street estimates.
Focusing on the Chinese market, Starbucks China added 118 new stores in the second quarter, up 14% year-on-year, bringing the total number of stores to 7,093, and entered 20 new cities, covering nearly 900 county-level cities.
Source: Brand
In terms of membership, Starbucks' 90-day active members exceeded 21 million, reaching an all-time high, and the total number of members continued to grow to more than 127 million, and membership sales continued to grow, accounting for 75% of sales, both of which reached a record high.
It is worth noting that the scale of 90-day active members in the sinking market has grown rapidly, and the membership growth rate has exceeded that of high-tier cities. Membership sales have grown considerably, with sales growth doubling that of high-tier cities, demonstrating huge market potential.
In terms of product innovation, Starbucks China launched a total of 27 new products in the quarter, doubling the number of new products launched in the previous quarter and tripling the number of new products in the same period last year. Among them, the Yilan series of beverages, which broke through the boundaries of coffee innovation, brought a combination of "coffee + olive oil", which was successfully launched in the Chinese market at the end of March and achieved performance that exceeded expectations.
The Olive series of beverages will be promoted to nearly 2,500 stores across the country in May to meet more customers. In addition, the in-store breakfast period was strong during the quarter, with sales growth of more than 50% compared to pre-pandemic levels.
Pictured: Olive series of drinks
Nasihan said that it will continue to implement the three key elements of the China strategy to provide more locally relevant coffee innovations, increase significant technology investment, improve omni-channel capabilities, digitally empower stores, and further expand new stores in sinking markets, especially in new county-level cities, given the strong economic benefits of new stores in sinking markets.