(Reuters) -Starbucks Corp missed Wall Street expectations for quarterly comparable sales on Thursday, as persistent weakness in the coffee chain’s China business offset strong sales in the North American market.
Shares of the Seattle, Washington-based company slid about 3% to $106.34 in extended trading.
While China has largely abandoned its zero-COVID policy and began reopening in early December, customer traffic at Starbucks still remained weak owing to widespread COVID-19 outbreaks in the country.
That resulted in a 29% fall in China comparable sales for Starbucks in its first fiscal quarter ended Jan. 1, pulling total international comparable sales down 13%.
Wall Street analysts have said near-term trends in China are bound to be choppy. However, the lifting of restrictions could benefit Starbucks heading further into the year, boosted also by its pricier cold drinks and growing loyalty program.
The company reported a 10% jump in comparable sales in North America, as a younger and wealthier coffee-loving crowd shrugged off inflationary pressures and continued to order coffees, cold drinks as well as food item add-ons.
Global comparable sales at Starbucks rose 5%, compared with analysts’ average estimate of a 6.75% rise, according to Refinitiv IBES data.
Also weighing on the company are the roughly 280 newly unionized U.S. locations, none of which have yet reached an agreement with Starbucks on a labor contract.
Starbucks reported an operating margin of 14.4% for the quarter, down from 14.6% a year earlier, pinched by heavy investments to modernize its stores through technology as well as elevated labor and raw material costs.
(Reporting by Deborah Sophia in Bengaluru and Hilary Russ in New York; Editing by Josie Kao)
