Starbucks CFO: US demand remains strong despite higher prices
Yahoo Finance · 06 Feb 2.9K Views

U.S. Starbucks customers still view the chain as an affordable luxury.

In its fiscal first quarter results, the Seattle-based coffee giant saw U.S. same-store sales jump 10% with eight of its 10 highest sales days in the company's history.

"We aren't seeing an issue with our demand," Starbucks CFO Rachel Ruggeri told Yahoo Finance, despite the company raising prices. A spokesperson did not respond to confirm the latest year-over-year price increase, but as of Q4 2022 prices at the chain were up 5% on a 12-month period.

Overall, North America same-store sales increased by 10% as well, driven by a 9% increase in average ticket and a 1% increase in comparable transactions. The increase in the average ticket is "related to pricing is analyzation from pricing moves we took last year," she said.

"Our pricing was taken largely in line with our inflationary pressures, so this year, the ticket is benefiting from the analyzation of that when we caught that," Ruggeri added.

It appears that higher prices are here to stay for the interim future with relief expected in the back half of the year.

"In the back half of the year, we'll start to see pricing return more towards historical levels and so we'll see a moderation of our ticket and an increase to our overall transaction," she said.

Starbucks reaffirmed its full-year guidance of 7%-9% of U.S. same-store sales with expectations to see more of a balance between the ticket size and transaction.

Earlier this week, Federal Reserve Chair Jerome Powell said prices are rising at a slower pace during his latest press conference. We can now say, for the first time, that the disinflationary process has started. We can see that."

Starbucks has yet to see that though. "We don't today see a material impact from disinflation," Ruggeri said.

"We saw an increase in terms of our overall logistics, part of that is due to demand, but it's also a fact of that there's still challenges across the supply chain."

Two categories that saw "slight easing," coffee and some commodity costs, such as plastic.

She added, "Broadly, we're still seeing inflation at an elevated level in fiscal year '23, not as high as fiscal year '22, but it is still elevated."

The U.S. customer remains loyal though, through and through. "We understand that our customers are dealing with a lot of uncertainty and economic challenges, but we aren't seeing an issue with our demand today."

Because of that, Starbucks plans to continue to offer incentives with its rewards program.

"We're not planning on discounting or moves of that nature. We continue to grow our rewards program and that creates value for our customers."

In Q1, the 90-day active members in the U.S. Starbucks Rewards loyalty program rose 15% compared to a year ago, reaching 30.4 million members. Members added a record $3.3 billion to accounts during the quarter.

(Source : Yahoo Finance) , all rights reserved by original source.