By Dhirendra Tripathi
Investing.com – Starbucks stock (NASDAQ:SBUX) traded 2.7% lower in premarket Wednesday after increasing cost pressure led the coffee-brewer to project a sharper decline in earnings this year.
The company now sees earnings per share falling 4%-6% for the year compared to its previous projection of no more than 4%.
The revised outlook follows first-quarter results that fell short of estimates, hit by surging costs in a tight market for labor and materials. The company is raising its wages this year across the U.S. to $17 an hour, one among many retailers to be doing so in their struggle to retain staff.
International same-store sales fell 3%, reflecting a 14% drop in China where the administration in several cities curbed movement to contain the pandemic ahead of the Winter Olympics, which start on Friday. The company said value-added tax exemptions in the mainland a year earlier trimmed the number by about 4 percentage points. Average ticket sales fell too in China.
North America and U.S. comparable store sales increased 18%, due to higher traffic at outlets and bigger orders from customers.
The company reiterated its projection for annual consolidated revenue to be around $32.75 billion, which would represent a rise of just under 13% from 2021.
First-quarter revenue rose 19% to exceed $8 billion, driven by holiday demand, reopening of economies and more stores. Comparable store sales were up 13%. Adjusted EPS rose 18% to 72 cents.
The company opened 484 net new stores during the quarter, closing the period with 34,317 units. China accounted for more than one in seven of those.