Starbucks to increase prices amid inflation

February 2, 2022 | By RetailME Bureau

Leading coffee chain Starbucks announced they will raise their prices in 2022 and reduce some spending  blaming supply chain disruptions and rise in labour costs. Reporting its quarterly earnings on Tuesday February 1, the company said they missed estimates for quarterly profits and comparable sales as the fast-spreading Omicron variant led to delayed office reopenings and new restrictions in China, the company’s fastest growing market. For the last three months of last year, the company’s profit soared 31 percent, to $816 million.Revenue grew to $8.1 billion, a 19 percent jump compared with the same quarter a year ago.

Starbucks shares fell as much as 5 percent in after-hours trading after it announced its results for its first fiscal quarter, before recovering some of those losses.  They did not specify the products for which it would raise prices. The cost increase might range by up to 30 cents on some drinks beginning on July 12. The company raised prices in October 2021 and again in January 2022, executives said on Tuesday, and more increases are coming.“We anticipate supply chain disruptions will continue for the foreseeable future. Although demand was strong, this pandemic has not been linear,” said Kevin Johnson, the president and chief executive of Starbucks adding that the company had “experienced higher-than-expected inflationary pressures.

The company revised its expected adjusted earnings per share growth forecast for 2022 to 8-10%, from at least 10% previously. The Seattle-based chain – whose workers in more than 50 of its U.S. stores are seeking to unionize – has also paid more to train new employees and for them to isolate after exposure to COVID-19.”When the Omicron surge began, inflationary costs and staffing shortages were amplified, well in excess of our expectations,”  Johnson added.

Global comparable sales rose 13% in the first quarter ended Jan. 2, Starbucks said, while analysts polled by Refinitiv IBES had expected growth of 13.2%. Same-store sales in the international division declined 3%, reflecting a 14% drop in China. Analysts had expected a 0.5% increase in the international segment.



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