Starbucks Beats Expectations With Focus on Operations
Sales at U.S. cafes rise in coffee giant’s latest quarter
Starbucks Corp. SBUX -2.54% boosted sales at U.S. cafes around the end of the year, beating expectations for the second consecutive quarter.
The coffee giant on Thursday posted same-stores sales growth of 4% in its home U.S. market during the first quarter of its fiscal year. Traffic was flat, an improvement from a fall in visits during the final quarter of its past fiscal year.
Overall, revenue and earnings also beat expectations, and shares rose 2% in after-hours trading.
The improved results follow a fiscal fourth quarter in which Starbucks posted progress in every operating metric it tracks, including sales. It is a sign that Chief Executive Kevin Johnson’s focus on operations is beginning to pay off.
Mr. Johnson, who took over from longtime leader Howard Schultz nearly two years ago, has taken a more analytical approach to managing Starbucks by doubling down on the chain’s coffee shops and scaling back some of his predecessor’s ambitions. He has turned over most of the company’s consumer products business to Nestlé SA, gotten Starbucks out of tea retailing and curbed plans to build about 1,000 luxury coffee shops under the Reserve brand.
“Our streamline efforts over the past six quarters are paying off by allowing us to bring more focus and discipline to our three strategic priorities,” Mr. Johnson said, referring to the U.S., China and the partnership with Nestlé that will get more Starbucks-branded packaged coffee in retailers around the world.
Starbucks is working to improve customer service in its U.S. cafes, developing healthier beverages and rolling out delivery across the country.
Following an initial delivery test in Miami, Starbucks is bringing coffee delivery to six more U.S. cities, involving about 2,000 stores in all, this spring.
Starbucks operating chief Roz Brewer said the company learned that certain beverages travel better than others and that it is refining its delivery menu.
The chain is also widening its digital reach with consumers. It increased the number of active loyalty program members in the U.S. to 16.3 million, a 14% increase over the year-ago quarter.
Same-store sales in China, the other major market Starbucks is focused on, rose 1% in the quarter. Starbucks this month is celebrating 20 years of doing business in China, a market where the coffee company is expanding rapidly. The chain entered 10 new cities in China during the quarter, expanding its store base by 18% to nearly 3,700 outlets. Starbucks has developed kitchens in China exclusively to provide delivery, in partnership with Chinese e-commerce giant Alibaba Group Holding Ltd.
“We are playing the long game in China,” Mr. Johnson said.
Same-store sales increased 4% globally, beating analyst expectations for 2.9% growth.
The Seattle-based company posted a profit of $760.6 million, or 61 cents a share, for the quarter ended Dec. 30, compared with $2.25 billion, or $1.57 a share, a year earlier.
Excluding one-time items, Starbucks earned a profit of 75 cents a share, a 15% increase from a year before. Analysts polled by FactSet were expecting earnings of 64 cents a share, or 65 cents a share on an adjusted basis.
Starbucks raised its guidance for adjusted earnings per share to reflect certain income-tax items—to between $2.68 and $2.73, from between $2.61 and $2.66—and reaffirmed its 2019 revenue growth projection of 5% to 7%.
Mr. Johnson also has promised to return more cash to shareholders. In fiscal 2018, Starbucks paid out approximately $9 billion in buybacks and dividends, and with an additional $5 billion accelerated share-repurchase plan that began in Oct. 1, the company has returned more than $14 billion of a total $25 billion commitment.
— Patrick Thomas contributed to this article.
Write to Julie Jargon at julie.jargon@wsj.com