SBUX stock is trading up this week after international coffee chain Starbucks Corp (NASDAQ:SBUX) reported solid fourth-quarter earnings, which topped analysts’ expectations.
Strong Chinese Market Boosting SBUX Stock
The gains in SBUX stock were driven by revenue of $6.75 million USD, compared to the expected figure of $6.68 billion USD, while earnings per share of 70 cents were in line with the consensus expectation. Global same-store sales, a key metric in measuring the performance of retailers such as Starbucks, grew by 5%, which also beat the expected figure of 4%. The coffee chain reported fiscal fourth-quarter net income of $802.9 million USD, up from $755.8 million in the same period last year.
Strong demand in the Chinese market is a source of great optimism for investors in SBUX stock. The Seattle-based chain opened more than 600 new stores in China, bringing its total retail footprint in the country to over 4,000 stores. Despite growing competition in the market from Luckin Coffee, same-store sales grew by 5%, while its delivery partnership with Alibaba (NYSE:BABA) contributed to 7% of its overall sales.
In July, Starbucks opened its first Starbucks Now store in Beijing, China. The new express store format integrates Starbucks’ store environment with the company’s Mobile Order & Pay technology and Starbucks Delivers into one seamless and convenient experience for customers. Starbucks’ push to reach more customers via its mobile app continues to buoy SBUX stock, with membership in the company’s rewards program up 15% in the US from the same period last year.
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Looking Ahead to 2020
In September, Starbucks said that it expects fiscal 2020 earnings to be below its “ongoing growth model of 10%” as it looks to scale back areas of the business that have been underperforming, such as wider food offerings. The company will instead focus on increasing the digitalization and automation of its business as it continues to contend with rising labor costs. Chief Executive Officer Kevin Johnson said the company is “focusing on the core things that differentiate Starbucks.” SBUX stock is trading at $84.56 at the time of writing.
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