Starbucks beat profit estimates despite hit on Chinese business

A Starbucks sign is seen at one of the company’s stores in Los Angeles, California, USA on October 19, 2018. REUTERS/Mike Blake Global Business Week ahead

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Aug 2 (Reuters) – Starbucks Corp ( SBUX.O ) beat Wall Street estimates for quarterly profit on Tuesday as higher prices in the United States and strong demand for its coffees offset business activity in China from renewed COVID-19 lockdowns.

The Seattle-based chain earned 84 cents per share, beating estimates of 75 cents. Shares of the company rose more than 1 percent in extended trading.

However, global comparable sales rose 3 percent in the fiscal third quarter ended July 3, beating analysts’ average estimate of a 3.76 percent increase, according to Refinitiv IBES.

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New lockdowns in Shanghai and the resurgence of COVID-19 in Beijing and other Chinese cities have forced Starbucks stores to close sit-down locations, leaving the company to offer only delivery or mobile orders for most of the quarter.

Comparable sales in China, Starbucks’ fastest-growing market, fell 44% in the third quarter, hurting its global business.

A 400-point decline to 15.9% due to higher costs of goods and improved benefits for some US workers. Same-store sales in North America rose 9 percent.

While defending an organizing drive that prompted workers at 200 stores to vote for a union since last year, interim CEO Howard Schultz said in April that the company would increase benefits and wages — but only for workers at non-unionized stores — starting this week.

“We have a clear vision of what we need to do to revitalize the company,” Schultz said in the earnings release. “The Q3 results we announced today demonstrate the early progress we’ve made in four short months.”

Total net income rose to $8.15 billion from $7.5 billion a year ago, beating analysts’ average estimate of $8.11 billion.

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Reporting by Deborah Sophia in Bengaluru and Hilary Russ in New York Editing by Maju Samuel and Matthew Lewis

Our Standards: The Thomson Reuters Trust Principles.

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