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Starbucks posts strong first quarter, but Covid restrictions hit sales in China

The Seattle-based coffee chain continues to perform robustly in North America and internationally but sales in China fell 31% during Covid restrictions in late 2022

Starbucks said revenues China, in its second largest market, fell 31% to $622m | Photo credit: Starbucks

Starbucks has said its strong first quarter results in the US and internationally highlight its resilience  and “accelerating demand” for the brand around the world. However, Covid trading restrictions saw sales fall in China, its second largest market, during the period.

Reporting on the three months ended 1 January 2023, Starbucks said total revenues increased 8% to reach a record $8.7bn with global same store sales rising 5%. 

The company achieved 14% revenue growth to $6.6bn across the US and Canada during the quarter, driven by 3% net store growth in the region over the last 12 months. 

Starbucks opened 86 net new outlets in North America in its first quarter 2023 to reach 17,381 stores. 

Internationally, Starbucks opened a total of 373 net new stores during the three-month period and now operates 36,170 outlets globally. 

However, despite the accelerated store expansion, international sales performed below company expectations, falling 10% to $1.7bn, predominately due to reduced footfall in China due to Covid-19 restrictions between October and November 2022. 

Starbucks, which currently operates 6,090 stores across China and plans to reach 9,000 by in the country by 2025, said revenues in its second largest market fell 31% to $622m. 

China lifted most Covid restrictions in December 2022. 

Government figures released at the end of January 2023 showed large increases in tourism and hospitality activity compared to the same period last year, indicating Starbucks’ sales in China will likely improve in the second quarter. 

“Starbucks performance in Q1 demonstrates the strength and resilience of our business and accelerating demand for Starbucks coffee all around the world. We posted strong results despite challenging global consumer and inflationary environments, a soft quarter for retail overall and the unprecedented, Covid-related headwinds that unfolded in China in Q1,” said Howard Schultz, Interim CEO, Starbucks. 

Following more than two years of operational disruption caused by the Covid-19 pandemic, World Coffee Portal research shows US coffee chains achieved a robust $4.5bn sales rebound in 2022, reaching 38,411 stores. 

As of September 2022, Starbucks held a total US coffee shop market share of 41% by outlets. 

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