Starbucks is reportedly considering the possibility of selling equity in its Chinese business.
On November 21st, according to foreign media reports, Starbucks is considering selling its equity in its China business. Insiders have revealed that Starbucks is exploring ways to expand its business in China, with the possibility of introducing local partners. The company has informally assessed the interest of potential investors, including domestic private equity firms. Some insiders also said that selling equity may attract the interest of Chinese corporate groups or other local companies with rich experience in the industry. Starbucks is still evaluating and has not yet decided whether to proceed with a decision.
On the afternoon of the 21st, a reporter from The Paper learned that a Starbucks global spokesperson stated, "We are wholeheartedly committed to our business, partners (employees), and long-term development in the Chinese market. As mentioned in the fourth quarter earnings conference call, the company is taking the time to gain a deeper understanding of our business operations and market competition environment in China. We are working hard to find the best growth path, including exploring strategic partnerships
On October 30th local time, Starbucks (Nasdaq: SBUX) released its fourth quarter financial results for the fiscal year 2024 ending on September 29th, 2024, as well as its financial results for the fiscal year 2024. In the fourth quarter, the revenue reached 9.074 billion US dollars, a year-on-year decrease of 3.2%; The net profit attributable to the parent company was 910 million US dollars, a year-on-year decrease of 25.4%.
Among them, Starbucks China's net revenue in the fourth quarter was 784 million US dollars, a year-on-year decrease of 7%. It is reported that Starbucks China's operating profit margin will continue to maintain double digits in the 2024 fiscal year. In terms of average selling price, Starbucks' financial report indicates that the average selling price in North America and the United States has increased by 4%; The international average selling price has decreased by 5%, while the Chinese average selling price has decreased by 8%.
In recent years, the 9.9 yuan promotional price has swept the Chinese coffee market, and the competition between local and international brands has become increasingly fierce. Regarding the development strategy of the Chinese market, Liu Wenjuan, CEO of Starbucks China, stated at the time that the coffee market in China continues to undergo profound changes, with frequent promotions and collective pressure on the entire industry, which has affected Starbucks China's same store sales. However, Starbucks China has achieved month on month growth in net revenue, store transaction volume, operating profit, and operating profit margin. "Our confidence and commitment to the Chinese market remain firm, and we will continue to adhere to a long-term development approach and overcome industry changes
China is Starbucks' second largest market globally. As of September 29th, Starbucks China has a total of 7596 stores, covering nearly 1000 county-level markets. In the fiscal year 2024, based on the annual store expansion plan, Starbucks China added 790 new stores, a year-on-year increase of 12%, setting a new historical high. At the same time, Starbucks is also accelerating the expansion of its stores in lower tier cities and new county-level markets. Half of the newly added stores are located in lower tier cities (third tier and below cities), and the proportion of newly added stores in lower tier cities has reached a historical high.
Starbucks' new chairman and CEO Nicol publicly mentioned in September that Starbucks' recent focus is on the United States, and it is necessary to restore growth to its largest business. Of course, there are also many opportunities around the world, and the team will focus on how to restore growth for Starbucks in China and ensure that all international businesses perform well again. According to foreign media reports, Nicole told analysts in October that he was working hard to better understand the company's business in China and pointed out that the competitive environment seemed "extreme". Nicole stated at the time that Starbucks needed to figure out how to expand in the market and was continuing to explore strategic partnerships that could be helpful for its long-term success, but did not provide further details.
It is reported that Nicole took over the position of Chairman and CEO of Starbucks from Laxman Narasimhan on September 9th. The market is generally optimistic about Nicole's appointment, believing that her rich experience in food and beverage brand management can lead Starbucks to tackle a series of challenges.
According to foreign media reports, Starbucks is facing pressure from activist investor Elliott Investment Management, who wants Starbucks to commit to re examining its China business. A few years ago, McDonald's and Yum! Brands divested their Chinese operations and sold their shares to private equity firms to achieve more growth and better cater to local tastes.
As of the close of the US stock market on November 20th, Starbucks was trading at $98.26 per share, down 0.09%.