Starbucks China Q2 Revenue Fell 11% as Store Count Reached 7,306

This is an English adaptation of a FoodBud historical article originally published on July 30, 2024.

On July 31, Starbucks reported results for its fiscal 2024 third quarter, corresponding to the calendar quarter ended June 30, 2024.

Global Performance

Starbucks reported quarterly revenue of USD 9.1 billion, approximately RMB 65.87 billion, down 1% year on year.

Its global store base reached 39,477 locations. The company opened 526 net new stores during the quarter, below the 588 opened in the same quarter a year earlier.

United States

In the U.S. market, Starbucks generated USD 6.37 billion in revenue, up 2% year on year.

Key operating indicators weakened:

• Comparable-store sales fell 2% year on year.
• Transactions declined 6%.
• Average ticket rose 4%.

China

Starbucks China reported quarterly revenue of USD 730 million, approximately RMB 5.28 billion, down 11% year on year.

Its main operating indicators all declined:

• Comparable-store sales fell 14% year on year.
• Transactions fell 7%.
• Average ticket fell 7%.

Active members reached 22 million. As of June 30, 2024, Starbucks China operated 7,306 stores.

For comparison, Starbucks China had 7,093 stores as of March 31, meaning it opened 213 stores in the quarter. Its prior-quarter revenue was USD 700 million.

Competitive Context

Luckin Coffee reported second-quarter revenue of RMB 8.4 billion, up 35.5% year on year. On revenue, the gap between Luckin and Starbucks China was widening. FoodBud noted that, from Luckin’s perspective, the next benchmark would increasingly be Starbucks’ global business, given that Starbucks’ global quarterly revenue was above RMB 60 billion.

China’s coffee market was becoming more competitive. Starbucks China continued to expand its store count, but its second-quarter revenue declined both sequentially and year on year. Comparable-store sales, transactions, and average ticket all moved lower in the quarter.

Management Commentary From Earnings Calls

Luckin Coffee’s CEO said the company was satisfied with its second-quarter performance, citing improving market conditions as weather warmed. The company attributed its performance mainly to proactive operating adjustments and effective use of its business model advantages, including digitalization, scale, cost optimization, and efficiency improvement. Luckin’s CFO also said warmer weather increased iced-drink sales and supported margin improvement.

Both Luckin and Starbucks were emphasizing store-level efficiency. In the U.S., Starbucks continued to deploy its Siren Craft system to improve store operating processes, raise efficiency, and reduce customer waiting time. The company also planned further upgrades to equipment such as coffee machines.

Starbucks was also working with Gopuff on plans to open 100 delivery-only stores in the U.S. market.

On China, Starbucks’ CEO said competition had intensified and consumers were spending more cautiously. Over the past year, large-scale store expansion and price competition had significantly disrupted the operating environment. The CEO also said first-year return on investment for China stores was as high as 70%, with average cash profit margin above 30%. In China, Starbucks was at an early stage of identifying strategic partners and building relationships.

Note: forward-looking plans and operating targets mentioned above are historical statements from the July 2024 article.