Starbucks results show its turnaround bid is gaining momentum

STARBUCKS’ quarterly results surpassed market estimates, a sign that efforts to attract diners with speedier service and new products are paying off. 

Sales from established restaurants rose 7.9 per cent in the latest quarter, according to a statement on Wednesday (Jul 30), above the average of analyst estimates compiled by Bloomberg.

It is the fourth straight quarter of growth for comparable sales. Transaction growth also outpaced market expectations. 

The stock rose in extended trading in New York after the release. The shares have advanced 23 per cent this year through Wednesday’s close, more than three times the gain of the S&P 500 Index. 

The results show that chief executive officer Brian Niccol’s plan to increase staff, better train workers and renovate stores is yielding results.

The coffee chain is also cutting costs by streamlining its corporate structure, closing underperforming locations and selling a stake in its China business to a local partner. 

Starbucks has replaced products that were not selling well with trendy alternatives such as blue coconut beverages, a line of iced fruit drinks with customisable levels of caffeine, and Mush overnight oats.

Chicken wraps, available at some stores, are meant to draw in customers in the afternoon, which has lagged the sales generated during the morning rush. 

Chief finance officer Cathy Smith said the results offer “confidence in the trajectory of our business”.  

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The coffee chain’s sales recovery has outpaced that of its profits due to higher spending on store remodels, increased hiring in its cafes and staff training.

Nonetheless, adjusted operating margin was 14.4 per cent in the quarter ended Jun 28, surpassing estimates. BLOOMBERG