Starbucks Corporation (NASDAQ:SBUX) has reported that its sales in the latest quarter surpassed expectations amid fears of declining sales.
Starbucks reported a 23% rise in sales during the release of its earnings report on Thursday. The company attributes part of this success to an extra week within the quarter. The company’s executives were pleased with the results especially considering that there were concerns that the firm would be negatively affected by declining restaurant sales.
A large percentage of the company’s sales is generated from the US market where it has set up a massive chain of operations. However, it also faces a lot of competition in the same market. Starbucks reported that café sales in the US were experiencing some slight improvements, thus offsetting the expectation of disappointing profits for the fourth quarter as well as the entire year. Q4 is historically characterized by strong sales.
“I think they are just playing cautious right now,” stated Jack Russo, an analyst at Edward Jones.
Russo also pointed out that Starbucks’ earnings guidance for the fiscal year 2017 is an indicator that the company has been moving with caution due to the growing competition and tough economic environment. The firm’s Q4 sales went up by 5 percent in established coffee shops in the Americas including the US which accounts for its largest market. Analysts had initially anticipated a 4.9 percent rise. However, its global sales went up by 4 percent which is lower than the expected 4.9 percent.
The difference in global sales was influenced by declining sales in some of the established stores in various regions including Africa, the Middle East, and Europe. Other regions such as the Asia-Pacific region and China experienced a 1 percent rise. Starbucks CEO Howard Schulz expressed some performance concerns due to the upcoming US elections.
“Wherever we have been, I don’t think we’ve ever witnessed such concern about what could happen in the U.S. as a result of the election,” explained Schulz.
Starbucks stock closed the latest trading session at $51.77.
