Starbucks earnings beat, fueled by strong U.S. cold beverage sales, but its shares drop on weak China outlook

Starbucks on Tuesday reported soaring cold drink sales in the United States, fueling an earnings and revenue beat for the company.

But the company also warned of a slower recovery in China, its second-largest market. It lowered its full-year forecast for the country’s same-store sales growth, despite raising its overall outlook for fiscal 2021 earnings per share.

The stock fell 3.4% in extended trading after hitting a 52-week high before the markets closed.

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

• Earnings per share: $1.01 adjusted vs. 78 cents expected
• Revenue: $7.5 billion vs. $7.29 billion expected

The coffee giant reported fiscal third-quarter net income of $1.15 billion, or 97 cents per share, up from a net loss of $678.4 million, or 58 cents per share a year earlier.

Excluding items, Starbucks earned $1.01 per share, topping the 78 cents per share expected by analysts surveyed by Refinitiv.

Net sales rose 78% to $7.5 billion, beating expectations of $7.29 billion. Worldwide, same-store sales surged 73%. A year ago, the company’s global same-store sales plummeted 40% during the quarter as the global pandemic prompted in lockdowns in some regions.

In the U.S., Starbucks’ largest market, same-store sales climbed 83%. On a two-year basis, the market’s same-store sales rose 10%. Nearly three-quarters of the company’s drink sales came from cold beverages, like its Nitro cold brew.

Outside of the U.S., Starbucks’ same-store sales jumped 41%, fueled by 55% growth in customer traffic. China reported same-store sales growth of 19%. A year ago, the country’s same-store sales fell 19%.

For fiscal 2021, the company raised its earnings per share outlook to a range of $2.97 to $3.02, up from its prior range of $2.65 to $2.75. On an adjusted basis, it’s expected earnings per share of $3.20 to $3.25, up from the prior range of $2.90 to $3. The fiscal year includes a 53rd week this year, which is expected to add 10 cents to the company’s earnings per share.

Starbucks also narrowed its outlook for global same-store sales growth for the full year. It now expects that metric to rise 20% to 21%, compared with a prior range of 18% to 23%.

The company also predicted slowing same-store sales in China, where it previously predicted growth of 27% to 32%. Now, however, it’s forecasting same-store sales growth of 18% to 20%. Next quarter, it expects flat same-store sales for the country.

In the United States, Starbucks now expects sales growth of 21% to 22% for cafes open at least 13 months, on the higher end of its prior range of 17% to 22%.

This is a breaking news story. Please check back for updates.