Starbucks shares soar 10% as coffee drinkers drive record revenue

Key Points
  • Starbucks reported better-than-expected earnings and same-store sales growth during its fiscal fourth quarter.
  • Customers spent a record amount in its cafes during the most-recent quarter.
  • In the U.S. and Americas, sales at stores open for at least a year grew 4 percent.
A new flat plastic lid that does not need a straw is shown on a cup of Starbucks iced tea in Sausalito, California. 
Justin Sullivan | Getty Images News | Getty Images

Starbucks shares soared Friday morning after the company delivered an upbeat earnings report that beat Wall Street's estimates on revenue, profit and same-store sales.

The Seattle coffee maker, which released its fiscal fourth quarter earnings Thursday night, said its customers helped drive its record revenue by spending more on frappuccinos, tea and snacks.

Its shares jumped 10 percent shortly after the markets opened Friday.

In the U.S. and Americas, sales at stores open for at least a year grew 4 percent during Starbucks' fiscal fourth quarter, beating analysts' forecast of 2.7 percent. It was the company's strongest same-store sales growth in the U.S. in five quarters, Kevin Johnson, CEO of Starbucks said during an earnings call Thursday.

Starbucks beats earnings, revenue expectations

That helped drive Starbucks' revenue to a fresh record of $6.3 billion, up 10.6 percent from $5.7 billion during the same time last year.

Here's what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Adjusted earnings per share: 62 cents vs. 60 cents
  • Revenue: $6.3 billion vs. $6.27 billion
  • Global same-store sales: 3 percent vs. 2.3 percent

"Starbucks' record Q4 performance reflected meaningful improvement in virtually every critical operating metric compared to Q3," Johnson said in a statement Thursday.

For about two years, Starbucks has been in a funk. While the company's same-store sales have been positive, investors have been looking for faster growth.

In the fourth quarter, the company posted better-than-expected same-store sales across all four of its major markets. Global same-store sales during the fiscal fourth quarter rose 3 percent, up from the 2.3 percent analysts had expected according to Refinitiv.

Neil Saunders, managing director of GlobalData retail, said consumers had more to spend on treats and indulgences during the 13-week period ended Sept. 30 ,and remodeled Starbucks stores enticed diners to stick around longer and buy more food and coffee.

"The final piece of the jigsaw comes from pushing the afternoon daypart much harder, primarily from loyalty-based discounts and offers," Saunders said. "We believe this has stimulated more purchasing, especially from larger groups wanting to take advantage of the 'happy hour' deals."

In the quarter, Starbucks continued to focus on its cold beverage platform, which includes cold brew, nitro cold brew, refreshers and cold foam, as customers have been craving more iced drinks than hot ones.

It also moved a number of "remedial tasks" that baristas were doing during the day to be done during closing so that they would have more time to work with customers, Brewer told CNBC.

Beverage sales "contributed 3 of the 4 points of comp growth, the strong efforts performance of fiscal year 2018 and given it's our highest margin category, we're encouraged by this shift in [comparable store sales] growth," Roz Brewer, chief operating officer at Starbucks, said during an earnings conference call Thursday.

"You'll continue to hear us talk about beverage innovation because that's where we see our greatest push from transaction growth," she said.

The company's net income fell 4.1 percent to $755.8 million, or 56 cents a share, during the 13-week fiscal fourth quarter ended Sept. 30, compared with $788.5 million, or 54 cents a share, during the same period last year.

After adjusting for some one-time items, the company earned 62 cents a share while analysts expected 60 cents a share, according to average estimates compiled by Refinitiv.

Starbucks said its loyalty program, which accounts for 14 percent of all its transactions, now has 15.3 million members, a 15 percent jump from last year. Starbucks Rewards members drove nearly 40 percent of sales in the U.S., the company said.

The company is also building an email list and sending promotions to non-rewards members. In the fourth quarter, Starbucks grew the number of registered customers to 10 million, up from 6 million in the third quarter.

"We are just getting to know them, engage them with happy hour deals," Brewer said. "We hope to convert them into rewards members."

During the quarter, the company open 604 net new stores and now operates more than 29,000 stores in 78 markets.

The company returned $3.6 billion to shareholders through a combination of dividends and share repurchases.

Also on Thursday, Starbucks announced its 2019 outlook. Here's what Starbucks expects:

  • To add around 2,100 net new Starbucks stores globally
  • Same-store sales growth near the lower end of its current 3 to 5 percent range
  • Consolidated revenue growth of 5 to 7 percent
  • Adjusted earnings per share in the range of $2.61 to $2.66

— CNBC's Kate Rogers contributed to this report.

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