SEATTLE – The revenue and net income performance of Starbucks Corp. reflect strength even as the quick service chain continues to adapt to changing market conditions influenced by the omicron variant of COVID-19. Profits increased 31% and sales 19% in the quarter ended Jan. 2 compared to the first quarter of fiscal 2021.
Omicron has impacted Starbucks in two main ways. First, sick employees impacted staff in some stores, and second, it affected customer mobility. The impact on mobility can be seen in the fact that same-store traffic in the United States declined by double digits when the first quarter of fiscal 2022 is compared to the same period of the previous year.
“Now we have seen, on the bright side, a positive side, the return of the breakfast time slot and peak transactions, which gives us hope in terms of growth of these transactions during this period,” said John W. Culver, Chief Operating Officer. and group president for North America, in a Feb. 1 conference call with securities analysts. “Furthermore, I would say that we will continue to leverage the convenience channels of mobile ordering and payment as well as drive-thru and delivery to meet changing customer needs to also drive transaction growth at the future.
“Finally, I would say that we will continue to assess the footprint of stores to ensure that we are building new stores and relocating additional stores, existing stores, in areas where customers are, given the pandemic and changes that have occurred in the pandemic.”
Starbucks’ first-quarter net income was $816 million, or 69¢ per share on common stock, an improvement from the first quarter of fiscal 2021 when profit was $622 million, or 53¢ per share.
Quarterly sales were $8 billion, down from $6.8 billion a year earlier.
The business unit’s sales in North America increased 23% in the quarter to $5.7 billion. The increase is attributable to a 12% increase in transactions and a 6% increase in the average ticket, according to the company.
“Our average ticket remained strong even as group orders continue to normalize, driven by prices, record food attachment, which had its seventh consecutive quarter at a record high and strong holiday performance,” said Rachel Ruggeri, Chief Financial Officer.
Drive-thru and mobile orders accounted for about 70% of sales at company-operated stores in the United States, the company said.
“In terms of stores and locations where we’ve seen traction, suburban and rural stores, where drive-thru is most prevalent, continue to outpace the rest of the portfolio,” Culver said. “Our drive-thru had its fourth consecutive quarter of double-digit competitive growth.”
Management said additional price increases are on the horizon as inflationary pressures impact Starbucks’ supply chain. The company increased its prices in October 2021 and January 2022, and Ms Ruggeri said additional prices were planned for the rest of the year.
“In terms of elasticity, we saw no significant impact on customer demand,” she said. “On the contrary, demand from our customers continues to grow. We’re coming off a very strong quarter in terms of deal growth at 12% for the US quarter, the highest since pre-pandemic levels, and our ticket is also very strong as well. So we are monitoring this very closely and will adjust accordingly.