Starbucks on Tuesday reported lower quarterly earnings despite higher sales, as strong demand and price increases in North America mitigated the impact of Chinese lockdowns.
Executives at the US coffee giant pointed to strong growth in its home market, which helped it post record quarterly earnings despite operations in its largest Chinese markets being suspended for much of the quarter.
The contrasting performance was evident in the numbers, with comparable sales in North America up 9 percent while those in China fell 44 percent.
Earnings for the quarter ended June 27 were $912.9 million, a decrease of 21 percent from the same period last year.
Meanwhile, revenue rose 9 percent to $8.2 billion.
The company’s margins in North America declined due to higher raw material and labor costs, a trend partially offset by higher prices.
“Starbucks has continued to add velocity with no sign of downward trading,” Starbucks interim CEO Howard Schultz said Tuesday of consumers’ willingness to absorb price increases.
That boosts confidence in the chain’s ability to weather any downturn, including a potentially “significant one,” Schultz said.
Starbucks has previously announced plans to spend an additional $1 billion on pay rises, training and other store investments in 2022 as it faces a union campaign that has surfaced at more than 200 US locations.
During a conference call with analysts, Schultz said the company plans more changes after “listening sessions” with employees.
That includes a program that could allow customers to tip Starbucks employees through the smartphone app.
Schultz, who recently pushed back his exit date from Fall 2022 to March 2023, said the company has narrowed the list of CEO nominees to “a select few” as it gets closer to naming a replacement.
He promised to stay with his successor “as long as necessary to ensure a soft landing”.
Shares rose 1.7 percent in after-hours trading to $85.11.
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