On July 31st, Starbucks released its third quarter financial report for the 2024 fiscal year. According to the financial report, Starbucks' total revenue for this quarter reached 9.1 billion US dollars, a year-on-year decrease of 1%, but a year-on-year increase of 1% at a fixed exchange rate; The net profit attributable to the parent company was 1.05 billion US dollars, compared to 1.14 billion US dollars in the same period last year. Starbucks China's revenue for the quarter was $730 million, a year-on-year decrease of nearly 11% and a month on month increase of 5%. Starbucks China achieved a quarter on quarter increase in overall operating profit margin for the second consecutive quarter.
The same store sales in China have declined, and the scale of stores in lower tier markets has expanded
The financial report shows that the month on month growth of Starbucks' revenue in the Chinese market is due to successful beverage innovation, localized holiday food, and increased frequency of member consumption during breakfast time. However, Starbucks' global same store sales decreased by 3% in the quarter, mainly due to a 5% decrease in same store transaction volume, offset by a 2% increase in average unit price. In the quarter, same store sales in China also decreased by 14%, with both average order value and same store transaction volume decreasing by 7%. However, the transaction volume of Chinese stores has achieved a quarter on quarter increase, and the operating profit margin of stores has remained in double digits.
We will continue to drive month on month growth in key business data and continue to invest in China for the long term, "said Liu Wenjuan, Co CEO of Starbucks China
In the third quarter, Starbucks opened 526 new stores worldwide. As of the end of the third quarter, the total number of stores was 39477, of which 52% were company owned stores and 48% were franchised stores. The stores in the United States and China account for 61% of the company's total global stores. Starbucks China has further expanded its store scale in lower tier markets, with 213 new stores added in the third quarter, representing a year-on-year increase of approximately 13% in the number of new stores. In addition, Starbucks has also entered 38 county-level markets. Currently, Starbucks China has over 7306 stores in more than 900 county-level markets, and the financial report states that the number of new stores opened this fiscal year will break records. Starbucks' global CEO, Johnnie Walker, stated that new stores and county-level markets continue to contribute to the company's increased cash return rate, and the investment return period is less than two years.
This quarter, Starbucks Rewards Club's 90 day active members reached a record high of 22 million, an increase of 1 million from the previous quarter, with a total membership of over 132 million. Among them, the consumption frequency of the most loyal Gold Star and Diamond Star members has increased. The proportion of member sales continues to maintain a historical high, reaching 75%. At the end of June, Starbucks China reached an innovative partnership with Hilton Group, upgrading the experience for Star Enjoy Club members. Both members can join each other's membership system and enjoy various membership benefits through their respective apps and other channels.
In addition, Starbucks China continued to release new products in the third quarter, launching a total of 17 new drinks, attracting new members, especially young Generation Z customers. Belgian black chocolate star ice cream has become the best-selling beverage in summer; The new fresh coffee series drinks are particularly popular among Generation Z, especially in the afternoon.
Southland: Price war leads to permanent changes in market environment
Starbucks' global CEO, John Woo, stated that in the past year, the industry has experienced unprecedented store expansion and large-scale price wars, even at the cost of sacrificing same store sales and profitability. This has had a significant and permanent impact on the market environment.
Liu Wenjuan also mentioned, "In the face of profound changes in the industry competition pattern, same store sales and other data will inevitably be affected in the short term. Our focus is on the present and steady growth. The continuous growth of key business data such as net income, store transaction volume, and profit margin on a month on month basis is our current focus of attention. The market environment has undergone significant and permanent changes, but the Chinese business continues to be profitable and has first-class returns and rich growth opportunities. We are confident in further growth in the future." She emphasized that the company will not sacrifice operating profit margin for sales revenue. Regarding the issue of price competition, Liu Wenjuan believes that in a competitive environment with frequent promotional activities, Starbucks maintains a high degree of restraint and avoids price wars. At the same time, they have adopted targeted and precise pricing strategies to create new sales growth and cultivate customer consumption habits, which is consistent with the brand's high-end positioning.
Eslite revealed that Starbucks' China business will be driven around three principles - excellent customer experience comes from excellent partner experience; Compared to other markets, Starbucks still has a lot of room for growth in penetration rate, while maintaining a consistent commitment to unique coffee experiences and high quality; The diverse and colorful stores will continue to serve the local community, paying tribute to Chinese culture and traditions. Even in a challenging market environment, we always adhere to these three principles and our high-end positioning
Although the operating data has declined to varying degrees, the capital market has responded positively to Starbucks' performance in the quarter. After the release of the financial report, Starbucks' stock price rose 3% after the market closed at $75.94, a slight increase of 0.98%.