Starbucks reported fourth quarter results that were better than expected.
While revenues and corporate results were still negative, other metrics signal a clear recovery from April.
CEO Kevin Johnson said the recovery is proceeding faster than expected.
Coffee giant Starbucks Corporation (NASDAQ: SBUX) reported fourth quarter results on Thursday afternoon, signaling that the company’s recovery from the COVID 19 lows “is happening faster than we expected,” CEO Kevin Johnson told Bloomberg TV.
Recovery from the Lows
Starbucks reported a solid EPS beat of 51 cents versus estimates of 31 cents, while revenues of $6.2 billion were better than the expected $6.06 billion. Net income fell to $392.6 million from $802.9 million last year, and the company stated that it believes it missed $1.2 billion in sales due to the pandemic.
Here is a complete summary of Starbucks’ fourth quarter report.
While revenues were still 8% lower year-over-year and global sales in the same businesses were 9% lower in the quarter, the CEO announced other key figures showing that a recovery is underway.
Johnson explained, for example, that the US business had a negative compensation rate of 65% in April. In the quick run-through to September, the U.S. business declined by only 4% year-on-year, even though 3% of stores nationwide remained closed.
China also signaled a rapid recovery from its lows, with 90% of its stores in the country closed in February. By September at the latest, the China business is not only showing a positive year-on-year comparison, but management is confident enough to continue to open hundreds of new stores.
The upswing was fuelled by management’s new goal of providing a “safe, familiar and convenient” store, the CEO said.
Customers want to come back
Starbucks has invested heavily over the years in digital initiatives such as mobile ordering and curbside pickup, the CEO said. But consumers will always want to visit a Starbucks store for the familiar in-house experience.
So far, about 60% of all Starbucks stores are open for eating when they have a certain capacity.
“As soon as we open limited seating, customers will sit back in our stores,” Johnson said. “We do it where they are socially aloof.”
Starbucks management said in its report on Thursday that it expects to fully recover from the suffering caused by the pandemic in 2021. This raises the question of whether management’s leadership will require an improvement in the situation from a health perspective and no further restaurant closures.
It is encouraging that Starbucks’ first months of recovery have been successful despite rising infection rates in many parts of the US, the CEO said.
“We know how to proceed in the world of COVID even before a vaccine and therapeutics are available,” he said. “Certainly we are looking for the day when there is a vaccine and therapeutics, because once that happens, we expect there will be a huge surge in demand”.