Starbucks Corp. is winning over American diners with cushier seats, more appetizing pastry displays and speedier service.
The coffee chain on Tuesday reported better-than-expected quarterly results and said it now sees comparable sales rising at least 5% this year, up from its previous view of 3% or more.
The shares rose 5.4% at 5:49 pm in New York extended trading. The stock has gained about 16% so far this year, surpassing the 4% advance of the S&P 500 Index.
The results show that Chief Executive Officer Brian Niccol's turnaround plan is paying off — offering Wall Street stronger evidence that the company's investments in store upgrades, additional staffing and more marketing are boosting demand. The chain is also cutting costs.
US customers placed more orders and spent more money per transaction by tacking on food and beverage toppings such as cold foam in the latest quarter, offsetting slower growth in China. Products such as a line of customizable refreshers — iced beverages with fruity flavors — are bringing guests in, according to Starbucks.
“Changes implemented by the company over the last 18 months are fully bearing fruit,” M Science analyst Matt Goodman said in an email. “Menu innovations like protein-boosted drinks and energy refreshers are helping to support both traffic and average check growth,” he added.
In the fiscal second quarter ended in late March, comparable sales rose 6.2%, exceeding analysts' expectations for a 3.7% increase. Adjusted earnings of 50 cents per share also surpassed the average of estimates.
‘Repeatable'
“Our focus now is on sustaining our momentum and making our results repeatable and durable,” Niccol said Tuesday on a call with analysts. In China, Starbucks' second-largest market, comparable sales rose 0.5%, short of expectations. The company recently sold a stake in the business to a local private equity firm and is looking to regain the ground it has lost to local rivals.
On the call, executives said that tariffs and elevated coffee prices hurt profitability in North America. Starbucks expects those pressures to moderate later this year. The company is monitoring how higher fuel costs might hit demand, but hasn't seen “a lot of the macro effects trickle into consumer behavior as it relates to Starbucks,” Niccol said on the call.
Starbucks said it plans to add 150 to 175 net US stores this year. It recently announced the opening of a new Nashville office, which the company has said will help it grow in the US Southeast — an area where its presence is relatively smaller. Tennessee also offers lower taxes and labor costs than Washington. Starbucks is asking more than 300 workers from its Seattle headquarters to relocate.
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(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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