Starbucks posts record-breaking sales even as U.S. inflation soars
Starbucks drinks are the most expensive they've ever been, but customers keep coming back.
As stores nationwide hiked prices due to inflation, sales continued to climb, the company said in its earnings report released on Thursday.
The global coffee chain reported record-breaking sales over the last fiscal quarter that ended in October. In North America, sales were up 11% compared to the same period last year.
Starbucks saw a 10% increase in the average ticket, meaning customers spent 10% more on each purchase this year than they did during the same period last year, on average, according to the report.
In North America, Starbucks generated $6.1 billion in revenue last quarter, up 15% from the prior year — another all-time record, said Rachel Ruggeri, Executive Vice President and CFO, on a conference call with investors.
But profits were down, at $1.1 billion last quarter compared to $1.3 billion the prior year.
As its competitors also feel the heat of inflation, Starbucks has more room to hike up its own prices, said David Reibstein, a marketing consultant and professor at the University of Pennsylvania's Wharton Business School.
"As they raise the price, they've got so much customer loyalty that they're still able to keep those particular customers," he said.
Still, the company faces challenges elsewhere as it continues to push back against national unionization.
Earlier this week, federal labor officials ordered Starbucks to re-open a popular location in Ithaca, New York, that the company shut down earlier this year. Workers at the Ithaca location near Cornell University, who voted 19-1 to unionize, allege that Starbucks closed the location due to union activity.
Workers United, affiliated with the massive Service Employees International Union, filed a complaint with the National Labor Relations Board on Tuesday.
As NPR previously reported, more than 300 stores have had union elections and about 250 Starbucks stores have successfully unionized over the past year. A store in Buffalo, New York was the first to form a union last December.
But unionized stores in the United States make up about 3% of about 9,000 company-owned locations across the country.
Plus, any negative PR from the unionization activity doesn't seem to have a huge impact on sales, according to Reibstein.
"The unionization is almost a separate issue," he said, explaining that not very many customers are concerned about the labor and union issues.
Starbucks founder and interim CEO Howard Schultz said the company plans to add eight new stores per day to reach a goal of 45,000 locations globally in 2025.
"We continue to manage the business through today's challenging operating environment," Schultz told investors on the conference call.
And don't expect prices to come down anytime soon.
"Right now, we're at a stage where everybody is expecting inflation and not overly put out by the fact that Starbucks is doing it," said Reibstein. [Copyright 2022 NPR]
