SBUX Starbucks Corporation

By Heather Haddon 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (July 26, 2019).

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 posted adjusted earnings of 78 cents a share for its fiscal third quarter, a 26% increase 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. U.S. same-store sales rose 7%. Cold beverages helped drive growth in the afternoon, the company said, a time when Starbucks has struggled to boost sales.

Shares rose over 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.

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

Data collected by Starbucks's digital programs is helping the company better understand what beverages customers want, said Chief Operating Officer Roz Brewer. "We know a lot more about our customers now," she said.

The company 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, which lost its status as the sole delivery partner to McDonald's Corp. last week.

Mr. Johnson said delivery isn't a big business driver in the U.S., but that he expects that demand to grow.

Starbucks's results were far better than its third quarter of last year, when same-store sales rose by just 1%. It closed its 8,000 company-owned U.S. stores for one day during that quarter for employees to undergo antibias 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 fiscal year to between $2.80 and $2.82 a share on an adjusted basis, from $2.75 to $2.79 previously. It trimmed its projected store openings globally this fiscal year to 2,000.

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

(END) Dow Jones Newswires

July 26, 2019 02:47 ET (06:47 GMT)

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