Sky-high sales at Starbucks: new records set
In an unexpected turn of events, Starbucks Corporation's stock price surged by nearly 10% in the fourth quarter of 2022, despite a notable drop in profits. The coffee giant reported a 28% fall in net income to $3.28 billion, and earnings per share decreased from $1.00 to $0.81, marking the first decline since 2019 [1].
However, the company exceeded analysts' expectations by a significant margin, generating $32.3 billion in revenue—a 11% increase from the previous year [1]. This revenue beat was primarily driven by strong demand in the U.S. and better-than-expected results in China [2].
Interim CEO Howard Schultz expressed optimism about the company's reinvention efforts aimed at driving long-term sustainable and profitable growth starting in 2023 [1]. CFO Rachel Ruggeri shared similar sentiments, stating that the outlook for 2023 sets up Starbucks for another year of record results [2].
Key reasons behind the stock price surge include strong revenue growth and demand, strategic initiatives and partnerships, and a solid dividend track record. The company's worldwide demand was viewed as a positive signal for future growth prospects [1]. Starbucks expanded its collaboration with DoorDash to enhance delivery services in several U.S. markets, which is expected to boost revenue [1].
Starbucks' history of dividend payments, with a 13.8% compound annual growth rate (CAGR) in dividends over five years and a current yield of 1.96%, makes it an attractive option for income-focused investors [1]. Despite the drop in profits, possibly due to margin pressures in the competitive and price-sensitive China market [3], investors were encouraged by the company's overall revenue outperformance, growth initiatives, and reinvention efforts aimed at driving future earnings and shareholder value [1].
In conclusion, the stock price increase was driven less by immediate profits and more by strong revenue growth, positive outlook, strategic partnerships, and shareholder-friendly policies that signaled confidence in Starbucks’ ability to return to profitable growth in the near term [1][3]. The stock price still has room to grow before reaching the record high of €107 reached in July 2021.
- Investors found encouragement in Starbucks' stock price surge, driven by factors such as strong revenue growth, positive outlook, strategic partnerships, and shareholder-friendly policies, despite a drop in profits in the fourth quarter of 2022.
- As Starbucks continues to focus on its reinvention efforts and growth initiatives, aimed at driving long-term sustainable and profitable growth starting in 2023, it remains an appealing option for income-focused investors due to its history of dividend payments with a 13.8% compound annual growth rate and a current yield of 1.96%.
