Starbucks (NASDAQ:SBUX) experienced remarkable success in its fiscal fourth quarter, largely attributed to the popularity of Pumpkin Spice Lattes and apple croissants, resulting in record-breaking revenue. However, the company anticipates potential growth moderation in the coming year due to global economic uncertainties.
For the July-September period, revenue surged by 11% to reach $9.4 billion, surpassing Wall Street’s $9.3 billion estimate. For the full fiscal year, Starbucks’ revenue increased by 11.6% to $35.9 billion. The company expects revenue growth to be at the lower end of the 10% to 12% range in the upcoming fiscal year.
Starbucks CEO Laxman Narasimhan attributed the success to the Pumpkin Spice Latte, which celebrated its 20th anniversary this year, driving record weekly sales since its late August launch. Global same-store sales increased by 8%, exceeding analyst predictions for a 6.8% rise, and this trend held throughout the full year.
Looking ahead, Starbucks projects same-store sales growth between 5% and 7% in the upcoming fiscal year, with Narasimhan keeping a close eye on changes in consumer demand in response to economic conditions.
In the fiscal fourth quarter, U.S. same-store sales climbed by 8%, accompanied by a 2% rise in store traffic and higher consumer spending on food and customized beverages. However, Starbucks anticipates a slowdown to between 5% and 7% for the coming fiscal year.
Narasimhan highlighted the ongoing revamp of North American stores, which has improved efficiency and boosted sales. The $450 million revamp introduced new workstations and equipment to streamline the production of iced drinks, a significant portion of U.S. sales.
In China, the company’s second-largest market, same-store sales grew by 2%, with a 4% increase in store traffic. Although customers spent less per visit due to fewer merchandise offerings, Starbucks witnessed accelerated sales growth in the second half of the fiscal year, with morning sales surpassing pre-COVID levels. The company forecasts a same-store sales growth of 4% to 6% in China for the coming fiscal year, up from 2% in 2023.
Starbucks has continued to expand, opening 816 net new stores in the quarter and ending the fiscal year with over 38,000 stores worldwide. It aims to have 41,000 stores by the end of the 2024 fiscal year.
In terms of financials, net income saw a 39% increase to $1.2 billion, or $1.06 per share, surpassing Wall Street expectations of 97 cents. As a result, Starbucks shares surged by over 11.5% in premarket trading.
Featured Image: Unsplash @ June Andrei George
