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Starbucks Posted Strong Same-Store Sales Growth

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Jan. 25 2019, Updated 8:04 a.m. ET

Fiscal first quarter performance

In the first quarter of fiscal 2019, Starbucks (SBUX) posted an SSSG (same-store sales growth) of 4.0%. Starbucks outperformed analysts’ expectations of 2.8% due to a 3% increase in the average ticket size. During the first quarter, the Americas and China/Asia-Pacific segments posted a strong SSSG and outperformed analysts’ estimates. The company’s SSSG in the EMEA (Europe, Middle East, and Africa) region didn’t meet analysts’ expectations.

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Americas segment

The Americas segment posted an SSSG of 4.0%. The segment outperformed analysts’ expectation of 3.2% due to an increase of 4.0% in the average ticket size. Compared to the same quarter in 2018, the traffic growth was flat during the first quarter.

Starbucks has been focusing on enhancing its in-store experience, beverage innovation, and digital driving relationships to boost its SSSG. During the first quarter, beverage sales contributed 3% of the SSSG due to the strong performance in the espresso and brewed platforms. Growth in food sales contributed 1.0%, while lobby sales declined 1.0% due to the SKU rationalization initiative.

Starbucks has broadened its digital reach and enhanced customers’ digital experience through the adoption of mobile order and pay. The company also improved its personalization features, which increased digital customer registrations. By the end of the first quarter, the company had 16.3 million active Starbucks Rewards members—14% growth from the same quarter the previous year.

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China/Asia-Pacific segment

The China/Asia-Pacific segment posted an SSSG of 3.0% and outperformed analysts’ expectation of 1.6%. The company’s SSSG was driven by 1% growth in transitions and a 2% increase in the average ticket size.

During the first quarter, Starbucks’s SSSG in China increased 1% due to 3% growth in the average ticket size. However, the decline in transactions lowered the company’s SSSG by 2%. The growth in food and merchandise sales and the Starbucks Rewards loyalty program contributed to an increase in the average ticket size. In Japan, Starbucks’s SSSG posted mid-single-digit SSSG due to growth in transactions and the average ticket size.

EMEA segment

During the first quarter, the EMEA segment posted a decline of 1.0% in its SSSG—compared to analysts’ expectation of 1.8%. The decline in transactions lowered the segment’s SSSG, while the average ticket size remained flat.

Outlook

Starbucks’s management expects its fiscal 2019 SSSG to be 3%–4%. Next, we’ll discuss Starbucks’s first-quarter EPS.

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