On July 30th Eastern Time, Starbucks (NASDAQ: SBOK) released its Q3 2024 financial report. From April 1st to June 30th, Starbucks' comprehensive revenue decreased by 0.6% year-on-year to $91.14, and net profit decreased by 7.62% year-on-year to $1.055 billion. Among them, the revenue in the Chinese market decreased by 10.71% year-on-year to $734 million, an increase of 3.97% compared to the previous quarter.
Starbucks' business segments can be divided into North American market, international market, and channel development market. The North American market is Starbucks' main source of revenue. In the third quarter of fiscal year 2024, Starbucks' North American market revenue increased by 1.17% year-on-year to $6.817 billion, while operating profit decreased by 2.12% year-on-year to $1.433 billion, and operating profit margin decreased by 0.7 percentage points year-on-year to 21.0%. Starbucks' same store transaction volume in the North American market decreased by 6%, while the average unit price increased by 3%, which collectively contributed to a 3% decline in its same store transaction volume.
In the third quarter of fiscal year 2024, Starbucks' international market revenue, including China, Japan, Asia Pacific, and Europe, fell by 6.59% to $1.842 billion, operating profit decreased by 23.2% year-on-year to $288 million, and operating profit margin decreased by 3.40 percentage points year-on-year to 15.6%. Under the combined effect of a 4% decrease in average order value and a 3% decrease in same store transaction volume, Starbucks' international same store sales decreased by 7% year-on-year.
The Chinese market is an important part of Starbucks' international market, but Starbucks China has experienced two consecutive quarters of revenue decline. In the third quarter of fiscal year 2024, Starbucks China's revenue decreased by 10.71% year-on-year to $734 million (approximately RMB 5.312 billion).
Starbucks has indeed become cheaper in China, but the decrease in selling prices has not led to an increase in transaction volume. During the reporting period, Starbucks China's same store sales decreased by 14%, with an average unit price decrease of 7% and a same store transaction volume decrease of 7%. In the same period of the previous year, Starbucks China's same store sales increased by 46% year-on-year, with an average unit price decrease of 1% and a 48% increase in same store transaction volume.
In fact, since the first quarter of the 2023 fiscal year, the average same store unit price of Starbucks China has continued to decline. In the first, second, third, fourth quarters of the 2023 fiscal year and the first quarter of the 2024 fiscal year, the average same store unit price has decreased by 1%, 1%, 1%, 3%, 9%, and 7% respectively.
Nanduwan Caishe previously reported that since the beginning of this year, Starbucks China has also launched multiple discounts through live streaming rooms and group buying channels, including 3 cups of coffee priced at 49.9 yuan, 2 cups priced at 39.9 yuan, and 1 cup priced at 19.9 yuan, which is significantly cheaper than its average coffee price of over 37 yuan per cup.
Despite a decrease in transaction volume compared to the same period last year, Starbucks China revealed that its store transaction volume has been steadily increasing month on month, partly due to an increase in the frequency of member consumption during breakfast time and an increase in occasional customer purchases in the afternoon and evening. Starbucks China's transaction volume has achieved monthly growth and quarterly quarter on quarter increase.
Regarding the issue of price wars, Liu Wenjuan, Co CEO of Starbucks China, pointed out in the latest quarterly financial report that in the competitive environment of frequent promotional activities, Starbucks maintains a high degree of restraint and avoids price wars. At the same time, it has adopted targeted and precise pricing strategies to create new sales growth and cultivate customers' consumption habits, which is consistent with Starbucks' high-end positioning.
Starbucks China has still been left behind by Luckin Coffee. Luckin Coffee released its latest quarterly financial report a few hours earlier than Starbucks. In the second quarter of this year, Luckin achieved a revenue of 8.403 billion yuan, a year-on-year increase of 35.51%. In the first quarter of this year, the revenue gap between Starbucks China and Luckin Coffee was about 1.172 billion yuan, while in the latest quarter it was 3.091 billion yuan. However, Luckin Coffee's operations are also under pressure. Its net profit in the second quarter fell by 12.81% to 871 million yuan, and the same store sales of its direct stores once again experienced negative growth, reaching -20.9%. The overall operating profit margin fell by 6.40% to 12.5%. In comparison, Starbucks China's operating profit margin is better, at 15.6%.
Liu Wenjuan, Co CEO of Starbucks China, pointed out that Starbucks China relies on continuous innovation of Starbucks' unique high-end products and experiences, focuses on the present, steadily grows, and does not sacrifice operating profit margins for sales revenue. Secondly, through rhythmic store expansion planning, we aim to explore huge blue ocean opportunities and ensure top-notch returns and profitability for our stores; Thirdly, continue to invest in its partners and provide unique Starbucks experiences to customers through them.
In the third quarter of fiscal year 2024, Starbucks China had a net increase of 213 stores, representing a month on month increase of 80.51%. As of June 30th, Starbucks China had 7306 stores, while Luckin Coffee had 19961 stores. On July 18th, the total number of Luckin stores worldwide exceeded 20000. Starbucks China has revealed that it will enter 38 new county-level markets in the third quarter of fiscal year 2024. Currently, it has stores in over 900 county-level markets. Starbucks China will continue to explore huge blue ocean opportunities and serve more communities. According to the current pace of opening stores, the number of new stores opened this fiscal year will break records.
It is worth mentioning that during the latest financial report conference, Starbucks Global CEO Nashan revealed that Starbucks China is still exploring strategic partnerships, including joint ventures, partnerships, strategic partners, technology cooperation, supply chain, etc., which are currently in the early stages. This has sparked speculation about whether Starbucks China will introduce franchising. However, Nashan did not disclose any further information.
As of June 30th, Starbucks has 16730 stores in the United States and a total of 39477 stores worldwide.