Starbucks Corporation reported financial results for its 13-week fiscal second quarter ending April 2, 2023.
Q2 fiscal 2023 highlights
- Global comparable store sales increased 11%, primarily driven by a 6% increase in comparable transactions and 4% increase in average ticket.
- North America comparable store sales increased 12%, driven by a 6% increase in comparable transactions and a 5% increase in average ticket; U.S. comparable store sales increased 12%, driven by a 6% increase in comparable transactions and a 6% increase in average ticket.
- International comparable store sales increased 7%, driven by a 7% increase in comparable transactions; China comparable store sales increased 3%, driven by a 4% increase in comparable transactions and a 1% decline in average ticket.
- The company opened 464 net new stores in Q2, inclusive of closures across North America and International as part of ongoing efforts to strengthen the portfolio, ending the period with 36,634 stores globally: 51% company-operated and 49% licensed.
- At the end of Q2, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,044 and 6,243 stores in the U.S. and China, respectively.
- Consolidated net revenues up 14% to $8.7 billion, inclusive of approximately 2% unfavorable impact from foreign currency translation.
- GAAP operating margin of 15.2% increased from 12.4% in the prior year, primarily driven by sales leverage, pricing, productivity improvement and gain on the sale of Seattle's Best Coffee brand. This expansion was partially offset by previously committed investments in labor, including enhanced store partner wages and benefits, increased general and administrative costs related to its Reinvention Plan as well as inflationary pressures.
- Non-GAAP operating margin of 14.3% increased from 13.0% in the prior year.
- GAAP earnings per share of $0.79 grew 36% over prior year; non-GAAP earnings per share of $0.74 grew 25% over prior year.
- Starbucks Rewards loyalty program 90-day active members in the U.S. increased to 30.8 million, up 15% year-over-year.
Laxman Narasimhan, chief executive officer, said in the announcement: “I am very pleased with our Reinvention progress and grateful for the opportunity to fully immerse into the company, which I formally took over on March 20, 2023. It is a privilege to have learned from our founder and partners around the world. From my immersion observations, our leadership team now has a clear line of sight into our growth headroom, as well as our opportunities to enhance margins and modernize the business, brand, partner experience and culture of Starbucks. As we strive to continue to be a different kind of company, we will unlock our limitless possibilities to meet the needs of today and, importantly, the future of Starbucks.”
Rachel Ruggeri, chief financial officer, said in the announcement: “I am so proud of our outstanding second quarter performance, underscoring strength in both topline and margin globally. This momentum was made possible by the investments we are making in our stores and partners, and allowed us to continue unlocking capital to further reinvest in our business. As we begin on this next step in our journey, I’m confident that, together with our partners, our execution against our Reinvention plan and broader strategies will position us in our new era.”
Sara Trilling, executive vice president and president of Starbucks North America, added in the announcement: “In support of our Reinvention Plan, and as part of our ongoing efforts to transform our store portfolio, we continue to open, close and evolve our stores as we assess, reposition and strengthen our store portfolio. We are pleased to have opened over 100 net new stores in North America during the quarter and are excited to now have nearly 17,500 stores across the segment.”
Q2 North America segment results
Net revenues for the North America segment grew 17% over Q2 FY22 to $6.4 billion in Q2 FY23, primarily driven by a 12% increase in company-operated comparable store sales, driven by a 6% increase in comparable transactions and a 5% increase in average ticket, net new company-operated store growth of 4% over the past 12 months, as well as strength in our licensed store sales.
Operating income increased to $1.2 billion in Q2 FY23 compared to $0.9 billion in Q2 FY22. Operating margin of 19.1% expanded from 17.1% in the prior year, primarily driven by strategic pricing, sales leverage, productivity improvement, as well as lapping COVID-19 related pay. This expansion was partially offset by previously committed investments in labor, including enhanced store partner wages and benefits, as well as higher commodity and supply chain costs due to inflationary pressures.
Q2 International segment results
Net revenues for the International segment grew 9% over Q2 FY22 to $1.9 billion in Q2 FY23, primarily driven by growth in its licensed store revenue including higher product sales and royalty revenues, net new company-operated store growth of 10% over the past 12 months, as well as 7% increase in comparable store sales. These increases were partially offset by approximately 10% unfavorable impact from foreign currency translation.
Operating income increased to $314.7 million in Q2 FY23 compared to $180.7 million in Q2 FY22. Operating margin of 17.0% expanded from 10.6% in the prior year, primarily driven by sales leverage as well as lapping amortization expenses. This expansion was offset by higher partner wages and benefits.
Q2 Channel Development segment results
Net revenues for the Channel Development segment grew 4% over Q2 FY22 to $480.7 million in Q2 FY23, driven by growth in the Global Coffee Alliance.
Operating income increased to $262.1 million in Q2 FY23 compared to $197.9 million in Q2 FY22. Operating margin of 54.5% expanded from 42.7% in the prior year, primarily due to the gain on the sale of Seattle's Best Coffee brand, partially offset by impairment charges against certain manufacturing assets.
