New drinks help Starbucks pull in more US, Chinese customers

New drinks, digital prowess help Starbucks bring in more traffic in US and China

Starbucks Corp. says new beverages and more efficient stores are drawing in more U.S. and Chinese customers, turning around the weaker traffic it saw at the start of the year.

The company rolled out popular new drinks, like nitro cold brew and pumpkin cream cold brew, to all U.S. stores in its fiscal fourth quarter. In China, where mobile orders and delivery now make up 10% of its business, it opened new express stores to speed orders.

Starbucks CEO Kevin Johnson said the company also continued a multiyear effort to streamline stores and remove unnecessary administrative tasks so employees can interact more with customers. New software makes scheduling easier, for example, while espresso machines automatically alert the company if they need preventive maintenance.

Johnson said those efforts differentiate Starbucks and are increasing customer satisfaction scores.

"The brand is healthy and strong and growing," Johnson said in a conference call with analysts Wednesday.

Same-store sales — or sales at stores open at least 13 months — rose 5% in the company's fiscal fourth quarter. That beat Wall Street's forecast of 4% growth, according to analysts polled by FactSet.

Starbucks said same-store sales in the Americas region rose 6% during the July-September period. Half that increase came from consumers spending more, but the other half came from increased traffic. Traffic was flat in the Americas in the first half of Starbucks' fiscal year.

Same-store sales in China rose 5%, with customer traffic up 2%. That reversed traffic declines from the first half of this year.

Starbucks said its fourth quarter net income rose 6% to $802.9 million. Earnings, adjusted for non-recurring items like restructuring costs, were 70 cents per share. That met Wall Street's forecast, according to analysts polled by FactSet.

Revenue rose 7% to $6.75 billion, topping analysts' forecasts of $6.69 billion. For the full year, revenue grew 7% to $26.5 billion, also ahead of forecasts.

For the 2020 fiscal year, Starbucks said it expects same-store sales growth of 3% to 4%. The company plans to open 2,000 net new stores; more than half of those will be in its key markets of the U.S. and China.

Excluding one-time items, the company said it expects earnings in the range of $3 to $3.05 per share in 2020. That would be an increase from this year's earnings of $2.83.

Starbucks shares rose 3% to $86.50 in after-hours trading.