Starbucks expects price increases, citing inflation, COVID pay and staffing costs

Starbucks will continue to raise prices in 2022 due to a combination of labor costs and supply chain disruptions.

The Seattle-based coffee giant announced Tuesday that between a rising cost of goods, employee pay amid the ongoing COVID-19 pandemic and inflation, all paired with customer demand, the company has reevaluated its pricing strategy.

Starbucks executives said that more price increases are coming after it first raised them in October 2021 and again in January 2022.

"We have already taken pricing actions this fiscal year, one in October of 2021, and another in January of 2022, and we have additional pricing actions planned through the balance of this year, which play an important role to mitigate cost pressures, including inflation, as we position our business for the future," CEO Kevin Johnson said on the company's first quarter earnings call earlier this week.

"There are many factors that contribute to our thoughtful pricing strategy, including: The increasing US inflation rate currently running at 7% or perhaps greater, as well as wage, customer demand and other costs," he explained.

Starbucks reported a 31% profit increase during the last three months of 2021 with a total of $816 million on the quarterly earnings report. The coffee chain's revenue which has grown to $8.1 billion boasted an overall 19% increase compared to the same quarter the year prior.

"The rapid spread of Omicron through the US required us to quickly adapt store protocols," Johnson continued. "Our COVID vaccination pay has supported thousands of partners in the broader efforts in helping get more people vaccinated. And with the highly transmissible Omicron variant, we had more partners leverage our COVID isolation benefits as they were either home sick or home isolating after being exposed to the virus, which led to significantly higher COVID-related benefits pay than expected."

Hours after the earnings announcement, the New York Times reported that Starbucks shares "fell as much as 5% in after-hours trading."