Starbucks’ international sales impacted due to rise in Covid cases in China

Global coffee company Starbucks’ international store sales decreased 13% driven by a 12% decline in comparable transactions and a 1% decline in average ticket, indicated its financial results for the first quarter that ended on January 1, 2023. Starbucks’ store sales in China decreased 29%.

Overall net revenues for its international segment declined 10% over Q1 FY22 to $1.7 billion in Q1 FY23 driven by approximately 13% unfavourable impact from foreign currency translation as well as rise in Covid cases in China.

These decreases were partially offset by growth in Starbucks’ licensed store revenue including higher product sales and royalty revenues, as well as net new store growth of 8% over the past 12 months.

“We posted strong results despite challenging global consumer and inflationary environments, a soft quarter for retail overall and the unprecedented, COVID-related headwinds that unfolded in China in Q1,” stated interim CEO Howard Schultz.

The coffee chain’s operating income decreased to $240.4 million in Q1 FY23 from $299.6 million in Q1 FY22. Operating margin of 14.3% contracted from 16.0% in the prior year, primarily due to a decline in sales in China.

However, global comparable store sales increased 5%, primarily driven by a 7% increase in average ticket, partially offset by a 2% decline in comparable transactions. The brand’s store sales in North America and the US increased 10% driven by a 9% increase in average ticket and a 1% increase in comparable transactions.

“I am very proud of what we achieved in Q1, with nearly every business segment contributing to our strong performance,” added Rachel Ruggeri, Chief Financial Officer, Starbucks. “And I’m pleased to share that our fiscal 2023 guidance remains unchanged, despite the headwinds from China.”