Starbucks Was Looking Too Hot Ahead of Earnings

Retail

Published: October 29, 2020 5:02 pm

Last Updated: October 30, 2020 8:42 am

Starbucks Corp. (NASDAQ: SBUX) had seen growth for years and years, taking over the coffee scene by force. The retailer has now released its earnings for its fiscal fourth quarter of 2020 at $0.51 per share and $6.02 billion in revenues. These are compared to $0.70 EPS and $6.75 billion in revenues a year earlier.

The consensus estimates from Refinitiv were calling for $0.31 in earnings per share (EPS) on $6.06 billion in revenue.

Starbucks noted that its global comparable store sales declined by 9%. The company cited a 23% decrease in comparable transactions, but it was partly offset by a 17% increase in its average ticket. Americas and U.S. comparable store sales declined 9%, while international comparable store sales were down 10%.

The company also reported that it opened 480 net new stores in the fourth quarter. That was up 4% for total unit growth versus this time in 2019. Starbucks ending the quarter with 32,660 stores globally.

Starbucks is continuing to see a recovery in China. The company noted that China’s comparable store sales were down by only 3% compared to a year earlier, with comparable transactions down 7% being partially offset by a 5% increase in the average ticket. It was also noted that international and China comparable store sales included a benefit from value-added tax exemptions of approximately 2% and 4%, respectively

One interesting view is that Starbucks is now offering guidance for the coming year, a rarity in corporate earnings with a pandemic to factor in. Consolidated revenues are being forecast to be in a range of $28.0 billion to $29.0 billion, including a $500 million impact attributable to the 53rd week. The 2021 adjusted earnings forecast was put in a range of$2.70 to $2.90 EPS, including a $0.10 impact attributable to a 53rd week. Refinitiv has its consensus estimates at $2.74 EPS and revenues of about $28 billion.

After closing up 1.3% at $88.30 ahead of earnings, this stock’s 52-week range was $50.02 to $94.13 and its Refinitiv consensus analyst target price was $89.19.

Starbucks was last seen trading down almost 1% at $87.45 in Thursday’s after-hours trading reaction. This was a more muted reaction to the prior earnings report.