What happened
Shares of Starbucks (SBUX 1.09%) sank on Friday after the coffeehouse leader's sales and profits failed to meet investors' expectations. As of 1:35 p.m. ET, Starbucks' stock price was down more than 3%.
So what
Starbucks' revenue rose 8% year over year to $8.7 billion in its fiscal 2023 first quarter ended Jan. 1. That was slightly below Wall Street's estimates, which had called for sales of nearly $8.8 billion.
Widespread coronavirus outbreaks across China weighed heavily on the restaurant company's results. Starbucks' comparable-store sales in China plunged 29%.
"In early December, zero-COVID was lifted, and COVID infection spiked across China, resulting in a dramatic decline in consumer activity across the country and causing the most severe COVID disruptions any retailer had encountered," interim CEO Howard Schultz said during a conference call with analysts. "For us, at its peak, nearly 1,800 Starbucks stores were closed during that month."
The steep downturn in China was offset by strong growth in the U.S. and other international markets. Store openings also contributed to Starbucks' revenue gains.
All told, the coffee giant's adjusted earnings increased by 4% to $0.75 per share. That, too, was slightly below analysts' projections, which had called for adjusted per-share profits of $0.77.
Now what
Starbucks expects COVID to continue to weigh on its results in its fiscal second quarter. Chief financial officer Rachel Ruggeri said comp sales in China were down roughly 15% in January.
"However, our long-term opportunity in China is very strong," Ruggeri said. "We expect the market to see meaningful sales rebound once recovery is in full swing."
