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Starbucks Corp.’s holiday earnings fell short of expectations in a Tuesday report, with the chief executive pointing to inflation, the new variant of COVID-19 and the labor market as a reason.
Starbucks
SBUX,
reported fiscal first-quarter earnings of $815.9 million, or 69 cents a share, on revenue of $8.05 billion, up from $6.75 billion a year ago and just shy of the fiscal-fourth quarter’s record total of $8.15 billion. After adjusting for restructuring, impairment and integration costs, the coffee chain reported earnings of 72 cents a share, up from 61 cents a share a year ago.
Analysts on average expected Starbucks to report adjusted earnings of 80 cents a share on sales of $7.98 billion, according to FactSet. Shares declined more than 4% in after-hours trading immediately following the release of the report, after closing with a 0.5% increase at $98.76.
“Although demand was strong, this pandemic has not been linear, and the macro environment remains dynamic as we experienced higher-than-expected inflationary pressures, increased costs due to omicron and a tight labor market,” Chief Executive Kevin Johnson said in a statement. “We remain focused on actions that drive both top- and bottom-line growth, including industry-leading investments to attract, train and retain the best talent for our stores as customer occasions increase.”
Starbucks stock has suffered recently, falling more than 15% in the first month of 2022, as the chain has struggled with declining visits amid the COVID-19 pandemic, as well as attracting and retaining workers. The company has begun to implement raises at the retail level, originally announced in 2020, which are expected to cut into its profit margins.
For more: Analysts say cost inflation will weigh on restaurants in 2022
“The makeup of the Starbucks story continues to face near-term challenges as management works to recover normalized traffic patterns and in-store operations across its domestic and international footprints, along with external factors which could influence their store-level P&Ls,” MKM Partners Executive Director Brett Levy wrote in a preview of the report.
Starbucks reported same-store sales growth of 13%, showing improvement from the holiday season a year ago and beating analysts’ average estimate of 12.7%.
Starbucks did not provide a fiscal second-quarter forecast with its results, but said executives will discuss their expectations for the year in a conference call scheduled for 5 p.m. Eastern.
Starbucks stock has treaded water overall in the past 12 months, thanks to the recent dip — shares have gained 0.2% in that time, as the S&P 500 index
SPX,
has increased 19.7%.
