SBUX Starbucks Corporation

By Heather Haddon 

Starbucks Corp. said sales rose in its key U.S. and China markets, thanks to new drinks and upgrades to its stores and digital-ordering platforms.

The world's largest coffee chain reported adjusted earnings of 78 cents a share for its fiscal third quarter, up 26% compared with a year earlier. Analysts polled by FactSet had expected earnings of 72 cents a share, excluding certain items.

Starbucks's sales of $6.8 billion were up 8%, also beating expectations. Global same-store sales growth of 6% was the strongest in three years.

Shares rose nearly 6% in after-hours trading. Starbucks's stock has climbed more than 40% this year, outpacing the S&P 500 Index and large U.S. restaurant stocks as a whole.

Chief Executive Kevin Johnson said after taking over in 2017 that he would slow the pace of opening more upscale coffee shops and focus on improving the company's existing stores. The chain is also opening new stores in markets where it has less of a presence, such as the central U.S.

Starbucks also remains focused on expanding its business in China. Net store growth there was 16% during the quarter, bringing the chain's total to more than 30,000 locations world-wide.

Starbucks is also investing more in technology. The chain earlier this week took an equity stake in technology company Brightloom to help improve its digital loyalty, payments and delivery systems.

The company also plans to add delivery from all its U.S. stores through Uber Technologies Inc.'s Uber Eats by next year, the companies said Tuesday. That was a victory for Uber Eats after the division of the ride-hailing giant lost its status as the sole delivery partner to McDonald's Corp. last week.

Starbucks's results were far better than its third quarter of last year, when same-store sales rose by just 1%. The company closed its 8,000 company-owned U.S. stores for one day during that quarter for employees to undergo bias training after Starbucks was criticized for its handling of the arrest of two black patrons at one of its Philadelphia stores in May 2018.

Starbucks is facing tougher competition from smaller chains of upscale coffee shops and from Dunkin' Brands Group Inc., which is seeking to update its image and offerings, including the addition of imitation-sausage breakfast sandwiches with Beyond Meat Inc. patties. Abroad, Luckin Coffee Inc., a Chinese company that specializes in delivery and mobile ordering, said Monday that it had signed a partnership to open coffee shops in the Middle East and India.

Starbucks raised its earnings guidance for this year to between $2.80 and $2.82 a share on an adjusted basis, from $2.75 to $2.79 previously.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

July 25, 2019 17:33 ET (21:33 GMT)

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