VF Franchise Consulting

Starbucks China sales slip, but company firm on strategy

Jul 31, 2018

Probably the most 'Asian' Starbucks ever. Can be found around ancient yet scenic Jinli Street in Chengdu China. Pic was taken in September 2017.

Starbucks China sales slipped 2 per cent on a same-store basis in the latest quarter, but the company will persevere with its expansion plan.

The number of transactions in China and Asia Pacific slipped 3 per cent.

“We remain confident in our global growth strategies, in the sustainability of our leadership position around all things coffee and tea and in our leadership teams around the world to navigate our next phase of growth,” said CEO and president Kevin Johnson.

While global sales growth was a modest 1 per cent – driven by a 3 per cent increase in the average transaction value, it was still a record for the coffee retailer. Consolidated net revenue rose by 11 per cent to US$6.3 billion in the three months to July 1, in part thanks to store openings, selling its Tazo division and closing Teavana mall stores in the US.

In China-Asia Pacific, net sales grew 46 per cent year on year, to US$1.229 billion, primarily driven by taking over ownership of the Starbucks East China business, a net increase of 746 stores year on year and favorable foreign currency translation. That was partly offset by the absence of revenue following the sale of the Singapore retail operations to Hong Kong-based Dairy Farm International subsidiary Coffee Concepts and a 1 per cent regional decrease in same-store sales.

Another highlight of the quarter was a 14 per cent increase in the number of active Starbucks Rewards members in the US, to 15.1 million customers.

Starbucks opened 511 net new stores in the quarter and now operates 28,720 stores across 77 markets.

CFO Scott Maw said Starbucks’ record revenues and profits for the quarter reflected the underlying strength of the Starbucks business and brand all around the world.

“We continue to grow share in virtually every market and channel in which we operate at the same time that our streamline initiatives are enabling us to sharpen our focus – and leverage our resources – against our highest value, long-term growth opportunities.”

Robert Stockdill – Inside Retail Asia

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