Starbucks Q4 - A Chinese Growth Story

Seattle-based coffee juggernaut Starbucks released their earnings for the quarter ending in September saying that the company now operates over 31 256 stores across 70 countries. The loyalty programme continues to keep those same-store sales very strong, both in the US and China.

Starbucks revenues are up 7% to $6.75 billion year-on-year. If you remove the impact of new stores, growth was 5% globally and 6% in the US. Iced 'nitro' coffee was a big hit, and now outsells Frappuccinos. Net income came in at $802.9 million, up 6.2% year-on-year. Younger US customers that are staying longer in the shops and spending more. Apparently this is because they view Starbucks as a much healthier alternative to fizzy drinks.

The company's loyalty programme grew to 17.6 million active members, up 15% year-on-year. Customers now have over $1.6 billion preloaded on their Starbucks Apps. More and more customers order coffee on their apps and then walk into the stores for a swift pickup.

In China, where Starbucks competes with the fast growing Luckin Coffee, there are now over 3 800 stores. Consumer spending in China has slowed, but Starbucks seems to be unscathed. Growth was 17%. Starbucks expects to open 2 000 net new stores globally, with 1 400 stores earmarked for China. The company also introduced a Starbucks Now store in Beijing. This is the new express store format that integrates with the Mobile Order and Pay technology as well as Starbucks Delivers.

We have not yet found any good substitute for coffee even in hot seasons; and as a result we expect the company to continue with the late stage cycle growth. Stay fully invested in this one!​