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Starbucks Warsaw Indiana – May 3 () – Starbucks Corp ( SBUX.O ) on Tuesday cut its guidance for the end of the fiscal year as sales growth beat Wall Street targets due to the spread of COVID-19 in China.

Comparable sales in China, where the chain has expanded rapidly in recent years to meet growing coffee consumption, fell 23%, including a 12% increase in North America.

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China’s strict lockdown measures to implement a zero-covid policy have disrupted operations at global companies with a strong presence in the Chinese market, including Apple ( AAPL.O ), Gucci-parent Kering ( PRTP.PA ) and the owner of Taco Bell. Yum China (9987.HK). read more

Starbucks Coffee Logo Is Seen On August 23, 2020 In Warsaw, Poland. News Photo

“I believe that Starbucks’ business in China will be bigger than our business in the U.S.,” CEO Howard Schultz said on a call with investors.

The company expects a “big impact” on its third-quarter results from the lockdown period in Shanghai and the resurgence of the virus in Beijing and other cities.

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However, demand in U.S. stores is “unrelenting,” Schultz said. Shares rose 5% in extended trading after the results.

“Demand and income are the main drivers,” said Ivan Feinseth, chief investment officer at Tigress Financial Partners. Tigress holds Starbucks stock on behalf of clients and accounts it manages. “Everything is good despite the pandemic, and the strength in the United States offsets the weakness in China.”

Warsaw Poland April 2018 Sign Starbucks Coffee Company Signboard Starbucks

Worldwide sales at Starbucks, which recently reinstated Schultz as the company’s leader amid a wave of labor unions at its U.S. stores, rose 7% in the second quarter, while analysts polled by Refinitiv had expected a 7.1% increase.

More than 50 cafes in the US. He chose to join the United Workers’ Union out of 240 that sought elections from August.

Despite the salary increase from last year, the company will invest an additional $ 200 million in fiscal 2022 to increase the salary of store managers, increase training, modify the “Coffee Master” program for baristas and open an internal application to communicate directly with 240,000 US. customers. employees.

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The company will also accelerate the release of new ovens and espresso machines and streamline maintenance. And update the customer app to give customers a more accurate time to pick up their drink. read more

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The new money will bring the total investment in employees and cafes to $1 billion this fiscal year.

Schultz also said customers could begin adding tips to credit and debit card purchases by the end of 2022, something baristas at United stores in Buffalo, New York, are asking for at the deal table.

“Federal law prohibits us from promising new wages and benefits to unionized stores. By law, we cannot make unilateral changes to unionized stores,” Schultz said, adding that “the union contract doesn’t even come close to what Starbucks is offering. “

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Schultz said that the last position as CEO is only temporary, and he and the board hope to appoint a successor in the fall, with the goal of having the person fully in the first quarter of the calendar of 2023. Schultz plans to stay on.

Berlin Germanymay 312017 Tall Starbucks Coffee Stock Photo 662888857

Higher labor, freight and commodity costs caused the North American operating margin to fall to 17.1% from 19.3% last year.

Total net income rose to $7.64 billion from $6.67 billion last year as the company opened 313 net new stores in the quarter. Analysts expected monthly revenue of $7.59 billion.

Praveen Paramasivam reports in Bengaluru and Hilary Russ in New York; Editing by Anil D’Silva and Lisa Shumake

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