(Source: Inside Retail Asia | 22 July 2016)
A massive Starbucks Asia store roll-out has boosted the global coffee company’s third quarter results.
Across China and the Asia-Pacific region, Starbucks opened 888 new stores in the first nine months of the current financial year. That helped lift revenues by 18 per cent in the region.
However, underlying same-store sales were a far more modest 3 per cent up on the same quarter last year.
“The concern is that some of this is related to a general slowdown in China which, if part of a longer term trend, could harm company earnings,’ observed retail analyst Neil Saunders, CEO of Conlumino.
The company’s Channel Development division – which encompasses the sale of Starbucks branded products in grocers and other stores- also posted positive numbers, with revenues rising 9 per cent. This was aided by strong sales of single-serve Starbucks products following a new agreement with Keurig Green Mountain to push branded K-Cups into more channels. A new partnership with Nespresso to launch Starbucks-branded pods should provided a further uplift to this division in the quarters ahead.
“Unfortunately, the stronger performances in Asia and in the Channel Development Segment were not enough to offset the weakness in the Americas, which remains larger than all other divisions combined,” said Saunders.
“And therein lies the forward issue for Starbucks: it has to increase momentum in this part of its business if it is to get back into high growth territory and if it is to avoid a future squeeze on profits.”
Globally, Starbucks seemed to lose momentum in the third quarter, with overall growth slowing to 7 per cent and global same-store growth moderating to 4 per cent – both below forecast.
“Worryingly, the slowdown took hold across all regions with even the Americas division, which usually puts in a fairly robust performance, posting a lacklustre same-store increase of 4 per cent. The fact that the company appears to have run out of steam somewhat overshadows its nonetheless impressive achievement of breaking the $1 billion operating income barrier for the first time in a non-holiday quarter.”