Starbucks stock falls after massive drop in China sales

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Starbucks shares slid Thursday afternoon after the company missed its quarterly sales estimate, in part due to a huge drop in sales across China as the country struggled with strict lockdowns followed by a renewed surge in the spread of the virus, leading to a Decline in trade hurt retail businesses across the country – one of Starbucks’ largest markets.

Important facts

The company reported quarterly sales of $8.71 billion, a new record, but falling short of Wall Street’s estimate of $8.78 billion.

Sales in North America rose 10% but plummeted 13% internationally, mainly due to a stunning 28% drop in China.

Starbucks also missed earnings per share, reporting 75 cents after analysts had expected 77 cents.

The company’s share price fell more than 3% in after-hours trading to $105.81.

Crucial quote

“We released today’s strong results despite a challenging global consumer and inflation environment, a weak quarter for overall retail and unprecedented COVID-related headwinds in China,” interim CEO Howard Schultz said in a statement.

Big number

More than 6,000. That’s how many stores Starbucks operates in China in over 230 cities.

key background

The past year has been a tumultuous one for Starbucks, as the stock plummeted more than 35% in the first half of 2022 before picking up momentum in later months. Schultz was reappointed to a third term as the company’s CEO in March after previous company chief Kevin Johnson resigned. Schultz is grappling with a wave of union organizing that has involved more than 250 stores as he pushes for a major company overhaul to cut costs, starting with baristas’ methods of preparing drinks. China moved in December to end its longstanding “zero Covid” policy, which had paralyzed much of its economy and sparked widespread protests, but the end of the lockdown years brought rapid spread of Covid and renewed public concern about the Illness.

What to look out for

Former PepsiCo executive Laxman Narasimhan will succeed Schultz as permanent CEO of Starbucks on April 1.

Further reading

Starbucks’ new CEO: Here’s what you should know about Laxman Narasimhan (Forbes)

Starbucks is rethinking almost everything, including making Frappuccinos (Wall Street Journal)

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