This is an English adaptation of a FoodBud historical article originally published on February 1, 2022.
Starbucks reported fiscal Q1 2022 results for the 13 weeks ended January 2, 2022, equivalent to calendar Q4 2021. Revenue rose 19% year over year to $8.05 billion, while net income increased to $815.9 million from $622 million a year earlier.
Global comparable-store sales rose 13%, driven by a 10% increase in average transaction value and a 3% increase in average ticket.
North America and U.S. comparable-store sales grew 18%, with transactions up 12% and average ticket up 6%.
CEO Kevin Johnson said double-digit traffic growth in North America helped lift revenue by 23% year over year to $5.7 billion.
CFO Rachel Ruggeri said drive-thru and digital ordering accounted for 70% of U.S. sales in fiscal Q1, with Starbucks Rewards members contributing 53%.
China comparable-store sales fell 14%, mainly due to a 9% decline in average ticket and a 6% decline in transactions.
As of January 2, 2022, Starbucks had 15,500 stores in the U.S. and 5,557 in China. Together, the two markets accounted for 61% of the company’s global store base.
During fiscal Q1, Starbucks opened 197 net new stores in China and entered 16 new cities.
In fiscal Q1, Starbucks added 484 net new stores globally, a 4% year-over-year increase, bringing its total store count to 34,317. Company-operated stores represented 51% of the system, while licensed stores represented 49%.
Starbucks reported 26.4 million 90-day active Rewards members in the U.S., up 21% year over year, including 1.6 million additions during the quarter.
In China, active members approached 18 million, up 2.6 million from the prior year. Active members contributed 75% of sales, and Starbucks said members visited stores at three times the frequency of non-members.
Johnson said Starbucks had taken two pricing actions over the previous four months and expected more during the year as wage increases and other costs pressured margins.
COO John Culver said pricing was driven by factors including inflation and partner investment. Starbucks adjusted prices on October 1, 2021, and again on January 1, 2022, as inflation continued.
Johnson said the two rounds of price increases had not had a significant impact on customer demand. In the U.S., he said demand continued to grow.
Starbucks expected further price increases in the coming months to offset margin pressure from inflation and pandemic-related labor market issues. Johnson cited three main U.S. cost drivers: inflation, pandemic-related employee wages, and the cost of hiring and training new workers in a tight labor market.
Supply-chain issues were linked mainly to third-party delivery providers affected by the pandemic. Transportation costs rose quickly, and shortages of ingredients and goods forced Starbucks to use more expensive spot purchases and alternative solutions. Johnson expected supply-chain problems to persist.
On labor shortages, Johnson said Starbucks’ previously announced long-term $1 billion investment in employee wages, disclosed during the fiscal Q4 2021 earnings call, was a wise decision to support business growth with strong talent.
Culver also pointed to efforts to reduce beverage-making complexity in stores, including greater investment in automation. Since the start of the pandemic, Starbucks had removed lower-volume SKUs from the menu, which it said would not materially affect overall revenue.
On China, Johnson said Starbucks was “playing the long game.” During fiscal Q1 2022, three-quarters of Starbucks China stores experienced temporary closures or reduced operating hours.
Digital sales in China were a bright spot, reaching a record 38% of sales in fiscal Q1. Starbucks also partnered with Meituan to expand delivery onto the Meituan platform and expected delivery to keep growing over the following quarters.
When asked whether Starbucks China would slow new openings or focus on improving comparable-store sales, both Starbucks China CEO Leo Tsoi and global CEO Kevin Johnson emphasized continued new-store development.
Tsoi said Starbucks China had opened more than 1,200 stores over the previous two years, most of them during the pandemic, and that 70% of China’s growth had been driven by new stores.
Johnson said the profitability and return on investment of new stores were “best-in-class,” and that Starbucks would continue opening stores in China while taking a long-term view. He added that the company would reassess the strategy only if revenue and return on investment fell below acceptable minimum thresholds.
Outside China, international markets including Europe, Latin America, Japan, South Korea, and other Asia-Pacific markets delivered 27% revenue growth.
Starbucks’ channel development business grew 12% year over year in fiscal Q1, supported by Global Coffee Alliance growth, with revenue of $417 million. Starbucks had also recently launched the BAYA energy drink with PepsiCo, aiming to develop another potential growth market.
For fiscal 2022, Ruggeri guided for revenue of $32.5 billion to $33.0 billion and single-digit comparable-store sales growth.
Note: Fiscal 2022 guidance and forward-looking pricing/store-opening expectations are historical figures from the February 2022 report.