Shares of Starbucks (SBUX 6.85%) sold off Wednesday in spite of a strong report from the coffee chain.  

The company posted double-digit comparable-store sales growth as it recovered from the worst of the pandemic, though overall revenue, which grew 11.2% to $6.67 billion, missed estimates at $6.82 billion due to the impact of planned store closures. On the bottom line, the company beat estimates with adjusted earnings per share of $0.62, ahead of expectations at $0.53, and the company raised its guidance for the full fiscal year.

Overall, the results show that Starbucks has made a full recovery from the pandemic in key markets like the U.S., and is continuing to gain momentum as vaccination rates improve across the world. The numbers below show how well Starbucks is performing even as the pandemic is not yet over.

A Starbucks barista smiling in front of some tables.

Image source: Starbucks.

1. EPS is on track for a record this year

Starbucks, which depends on commuters, students, and others making frequent visits to its cafes, was hit hard by the pandemic as the need for a "third place" plunged during the lockdown periods. Since then, the company has adjusted to the pandemic by offering curbside pickup, shifting business to its drive-thru locations, and even rebuilding or moving some locations to accommodate changing demands. As a result, the company now expects to generate record earnings per share this fiscal year, which is even more remarkable considering its fiscal year began in October, before vaccines were even approved.

Management raised its guidance for adjusted EPS for the year from a range of $2.60 to $2.80, to a range of $2.80 to $2.90, excluding the $0.10 benefit from a 53rd week in the year, which is better at the midpoint than its fiscal 2019 adjusted EPS of $2.83. That's a clear sign that Starbucks has made a full recovery from the global health crisis even as it's still experiencing some of its negative impacts.

2. Two-year comps jumped 11% in the U.S.

Starbucks posted comps growth of 15% in the quarter as it lapped the worst of the pandemic in China and the beginning of it in the U.S. and much of the rest of the world. But what was most impressive was the fact that two-year comps, which date back to before the pandemic, jumped 11% in the U.S. in March, showing Starbucks is now well ahead of pre-pandemic levels. CFO Rachel Ruggeri said on the earnings call that the 11% rate was above the company's long-term expectations of 4% to 5% comps growth, meaning the company is ahead of where it expected to be in the U.S. before the pandemic hit. That's an impressive feat, and bodes well for the ongoing reopening, though the latest round of stimulus checks seems to have boosted sales.

In China, two-year comps actually fell 9%, adjusting for a 4% value-added-tax benefit, as there were strict travel restrictions imposed during the Lunar New Year holiday. Still, results have mostly recovered and should be above pre-pandemic levels as restrictions are loosened. 

3. 52% of U.S. transactions came from rewards members

Starbucks' rewards program is a key competitive advantage for the company. By leveraging its popular mobile app, it encourages customers to visit its cafes frequently as well as offering a benefit for going to Starbucks versus a rival cafe.

In the second quarter, more than half of its domestic transactions came from rewards members, showing how powerful the program has been at driving frequent purchases and helping Starbucks weather the pandemic. In the quarter, it added 1 million 90-day active rewards members in the U.S., bringing the total to 22.9 million, an 18% increase year over year. Starbucks also increased adoption of its mobile order and pay program, from 18% of U.S. transactions a year ago to 26%.

It gets better

Starbucks shares were trading near record highs coming into the report, and the results show why. The java giant took on the biggest challenge in its history, and responded quickly and effectively to restore the business to full strength in less than a year. 

There are even more reasons to be impressed with the company's momentum. Starbucks is expanding faster than any restaurant chain in the world, with 2,150 new stores expected this year (a net of 1,100 accounting for planned closures), and management sees EPS growth of 20% or better next year as the company laps some of the pandemic-related weakness in the current fiscal year. 

The stock finished Wednesday down 3.2%, but the quarter leaves little doubt that the company's domination of the cafe industry is as strong as ever. Starbucks stock should continue to be a winner.