Starbucks released its first quarter report for the fiscal year 2024 (for the three months ended December 31, 2023), showing quarterly sales revenue of $9.425 billion, a year-on-year increase of approximately 8.2%, slightly lower than market expectations of $9.6 billion; Realized a net profit of 1.024 billion US dollars, a year-on-year increase of 19.78%. Although Starbucks has maintained a high level of growth in net profit, it is still slightly lower than the market expectation of $1.066 billion.
As of the close of the US stock market on January 30th, Starbucks' stock price has risen slightly by 0.3%.
More specifically, the sales growth rate of Starbucks in its two major consumer markets, North America and the international market, is relatively stable. In the latest quarter, the sales revenue in North America was 7.121 billion US dollars, a year-on-year increase of 8.69%; The international sales revenue was 1.846 billion yuan, a year-on-year increase of 9.89%.
However, in terms of revenue and net profit performance in the new quarter, there is a clear differentiation between the two regions. Starbucks North America's revenue was 1.521 billion yuan, a year-on-year increase of 25.44%; The regional operating profit margin increased from 18.5% in the same period last year to 21.4%. Due to the relatively small number of new stores opened in North America, its revenue growth is mainly driven by growth in average customer value and same store sales.
In the international region, Starbucks achieved a revenue of 242 million yuan, only a year-on-year increase of 0.4%; The regional operating profit margin has also declined from 14.3% in the same period last year to 13.1%. Starbucks explained in its financial report that this was mainly due to a significant increase in new stores, employee salaries, and other strategic investments.
As the second largest consumer market for Starbucks, China added 169 new stores in the first quarter, with a decrease in opening speed compared to the 326 stores in Q4 of fiscal year 2023. However, in the new quarter, same store sales increased by 10% and same store transaction volume increased by 21%. Among them, delivery and online orders accounted for 52%, setting a new historical high. At present, the total number of Starbucks stores in China has exceeded 7000, and their stores continue to penetrate the county-level consumer market in China.
"The long-term opportunities for the Chinese market are obvious, including increasing penetration rates in existing cities and entering new county-level markets. As of the first quarter, we only entered 857 out of nearly 3000 county-level and above cities in China. In the past few years, our new store profitability in county-level markets has also been better than that in first tier cities. Therefore, we will continue to accelerate our sinking and enter more county-level markets." Starbucks China Chairman and CEO Wang Jingying said.
At the same time, other reports indicate that the average average unit price of Starbucks stores in China decreased by 9% year-on-year in the latest quarter, while in the previous quarter (Q4 of fiscal year 2023), the average unit price of stores in China decreased by 3% year-on-year. Proactively sinking, higher store opening costs, and more proactive coupon distribution may also have become a major reason for Starbucks' recent growth in international sales, but the actual revenue and profit margin growth is weak.
Faced with the "unfavorable start" of the first quarter of the 2024 fiscal year, Starbucks executives stated in their financial reports that despite these temporary unfavorable factors, we still have confidence in long-term growth and a sustainable business model. At the same time, the financial report also mentioned that the "headwind" situation in the first quarter of the 2024 fiscal year may affect the company's annual financial performance.
There are reports that Starbucks will lower its sales revenue growth forecast for the 2024 fiscal year and also lower its global same store sales growth forecast, but it still maintains an expected annual profit growth of 15% to 20% per share.
Despite facing many pressures and challenges, the growth of Starbucks' sales scale in China has made it determined to continue to increase its investment, especially in localized operations based on Chinese consumer demand and culture.
Recently, Starbucks has also closely followed the trend of linkage with domestic tea brands, launching new products and distinctive peripheral products in collaboration with "Da Nao Tian Gong". It is reported that the co branded new product is inspired by ginger milk, and its taste is more catering to Chinese consumers. Previously, Starbucks also launched 12 new coffee products in China and invited Fei Xiang as its Christmas ambassador.
Looking back at 2023, the competition for opening stores between Luckin and Kudi has gradually come to an end, and major tea and coffee brands have entered a period of slow growth. While stabilizing the 9.9 yuan low-priced coffee discount, they have gradually attracted more new consumers through joint branding and marketing activities. Among them, Luckin has gained popularity through several collaborations with well-known brands and IPs such as Guizhou Maotai, Cat, and Mouse; Kudi also closely follows Luckin's footsteps, actively promoting liquor co branding and celebrity endorsements.
Although Starbucks has recently attempted to seize the "traffic password" through collaboration, Wang Jingying emphasized that Starbucks will not participate in price wars and will focus on high-quality, profitable, and sustainable growth. Starbucks China Co CEO Liu Wenjuan recently stated in a media interview that all the "rolls" have reached the end point, and the "rolls" are about value and quality.
According to the previous plan, Starbucks will open 9000 directly operated stores in China by 2025.