The coffee chain Starbucks Corp. (Nasdaq: SBUX) reported fourth-quarter results late last week. The figures show the recovery of the company after a substantial decrease in the first months of the COVID-19 pandemic. Moreover, in spite of the current coronavirus restrictions, Starbucks expects to record double-digit growth in comparable sales by 2021.
Starbucks reported a 9 percent year-on-year decrease in comparable sales in the global market in the fourth quarter. Comparable sales also fell 9 percent in the U.S. market, while that fell 3 percent year-on-year in China. Comparable sales in the U.S. market saw a drop of 65 percent in the spring while it decreased to 40 percent in the summer. The recovery was made possible in many ways by the opening of almost all the chain’s cafes, and in addition, under the circumstances, Starbucks altered the sales system. In particular, small suburban and urban restaurants, where one can pick up pre-ordered coffee, are now the main focus. Comparable sales in China were already positive in September, thanks to the new business model but in the U.S., company saw September sales declined by 4 percent year-on-year.
Starbucks was able to post adjusted earnings per share of $0.51, down 27 percent year-on-year but better than the third-quarter loss, due to the sales recovery.
Starbucks is confident that by the end of the second quarter of fiscal 2021 (i.e. in March), the company will gradually recover and sales will reach pre-pandemic levels in the U.S. In the coming year, the company expects comparable global sales to increase by 18-23 percent, including growth in the U.S. of 17-22 percent and growth in China of 27-32 percent. Given that there are still serious restrictions on the hospitality business in the U.S. and Europe, Starbucks’ primary growth could fall in the second half of the year.
In particular, the firm believes that in-cafe traffic will recover very quickly with the lifting of restrictions. It is also expected that the pandemic will open up new opportunities for the Starbucks network to expand. New properties in commercially promising places are likely to be available in the near future, which the company can purchase or rent for its cafes. At the same time, the network plans to close about 800 poorly located cafes that lack sufficient traffic. Stable and big business will enable Starbucks to increase market share as the pandemic is likely to lead to the closure of single coffee shops or smaller chains. There will be a place in the market for Starbucks and some of its major competitors.
A 10% increase in dividends to $0.45 per share was announced by Starbucks. The first increased payment will be made at the end of this month.