The fears of investors in the Starbucks coffee chain turned out to be in vain

Shares of the coffee chain Starbucks Corp. (SBUX) received a positive boost this week thanks to the report for the second quarter of fiscal year 2022. Many investors feared a deterioration in financial performance, but the results were better than expected. In the quarter that ended on April 3, Starbucks’ revenue grew by 15% and reached a record $7.6 billion. Despite a partial lockdown in China, GAAP earnings per share were $0.58.

Moreover, the number of subscribers to the Starbucks Rewards program increased by 17% to 26.7 million. The main driver was sales growth in the North American market (+12%), while sales in the international market fell by 8% due to a significant (-23%) drop in sales in China. Recall that more than 60% of Starbucks outlets are located in China or the USA. Starbucks has not stopped expanding its business, and 313 outlets were opened last quarter.

Currently, the company is focused on increasing its presence in the American market, where the Starbucks brand is popular and maintains steady positive sales dynamics. Thus, the main concerns of investors about a possible strong drop in sales and losses of Starbucks against the background of problems in China were not justified. So far, the American market has been able to compensate for these factors. A more significant problem may be rising costs. Because of rising prices, Starbucks spent more on wages and bonuses for employees in the second quarter.

As a result, the operating margin decreased to 12.4%, and this reduced profit growth. At the same time, employee retention efforts may benefit in the future. Given that there aren’t enough people to work for the company, it will be easier for them to fill jobs during the recovery period after COVID-19.