Higher gas prices may be changing some consumer spending decisions, but they don't appear to be dampening consumers' appetite for Starbucks.
Starbucks said Tuesday that its global same-store sales for the January-March period rose 6.2%. That was higher than the 4% increase Wall Street was anticipating, according to analysts polled by FactSet. In the U.S., same-store sales jumped 7%.
Unlike fast food companies, which have been piling on discounts to
win back lower-income consumers, Starbucks said it continues to see traffic from people of all ages and income levels.
“What we see with folks is, when you give them an experience that they feel is unique, differentiated, special, a little touch of luxury, it goes a long way. And we’re seeing that play out with every income cohort,” Starbucks Chairman and CEO Brian Niccol said during a conference call with investors. “We have to demonstrate to people that it’s worth it.”
Still, Niccol said the company is being cautious with its financial guidance because it's not sure how consumer behavior might change if costs continue to rise.
“As you know, these issues continue to happen, whether it shows up in gas prices or utilities in other ways or other input costs,” he said.
Starbucks said it now expects both global and U.S. same-store sales to rise 5% for the full year, up from previous guidance of 3%. The company also raised its full-year earnings guidance to $2.25 to $2.45 per share, up from $2.15 to $2.40 per share.
Starbucks shares rose more than 5% in after-hours trading.
Over the last year, Starbucks has been adding employees to stores during rush times and using technology to better sequence its in-store and mobile orders. Niccol said 80% of U.S. company-owned stores are now meeting Starbucks' goal of in-store or drive-thru service within 4 minutes and mobile order pickups within 12 minutes.
It has also encouraged friendlier service and is redesigning stores and adding seating to give them a cozier, coffeehouse feel. Niccol said around 300 U.S. stores have been redesigned so far and 1,000 will get that treatment by the end of this year.
Starbucks has also shuttered underperforming stores and cut corporate jobs. Last year, the company closed hundreds of stores in the U.S., Canada and Europe and laid off at least 2,000 nonretail employees.
Niccol said that leaner structure is allowing the company to innovate more quickly. He cited premium bakery items that were introduced during the second quarter, including a strawberry matcha loaf and a yuzu-flavored croissant.
New drinks, like protein-enhanced lattes and energy refreshers, are also drawing in customers. Niccol said he isn't worried about growing competition from brands like McDonald's, which recently announced its own menu of refreshers and handcrafted sodas.
“What my experience has been is when the category starts being talked about, the market leader benefits. And, you know, that’s going to be us in this scenario,” Niccol said.
Starbucks said its revenue rose 9% to $9.5 billion for the second quarter. That was also ahead of analysts' forecast of $9.2 billion.
Adjusted for one-time items, the company earned 50 cents per share. That also came in ahead of analysts' forecast of 43 cents.
