Fresh off Starbucks Corporation (NASDAQ: SBUX) fiscal second quarter earnings report, CEO Ron Johnson said on CNBC’s “Squawk on the Street” that the ongoing vaccination effort will help people reconnect with each other in person.
Return to pre-COVID levels in US market
Starbucks’ fiscal second quarter report was highlighted by a 9% same-store sales growth in the US versus a 3% decline in the same quarter last year. Total revenue rose 8% year-over-year to $4.6645 billion, marking a complete sales recovery in the US market.
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The quarter demonstrates that the COVID-19 vaccination effort represents the “unlock for what we call the great human reconnection,” the CEO said.
“We saw that unfold across the United States,” he added.
This contrasts with Starbucks’ performance across the world, especially in Europe where rising COVID-19 cases forced more people to stay home. China also introduced some new restrictions related to non-essential travel near the Chinese New Year.
This contributed to a fiscal second quarter company-wide revenue miss of $6.7 billion versus estimates of $6.8 billion. But EPS of 62 came in nine cents higher than expected and management lifted its full-year revenue, EPS, and operating margins outlook for 2021. Shares of Starbucks were lower by around 3% Wednesday afternoon amid the mixed earnings report.
“Very positive signs but the unlock is getting vaccines, getting shots in arms — and look at what happened in the US,” he said.
Why management isn’t lifting comps guidance
Starbucks’ signs of momentum raise the question of why management isn’t comfortable enough in its outlook to lift its comps outlook. Despite offering a superior outlook across multiple metrics, the company continues to guide for Americas and US comparable-store sales growth of 17% to 22% and global comparable-store sales growth of 18% to 23%.
Starbucks already guided a “pretty strong” comparable store sales growth outlook and “we are sticking to that,” Johnson said. The company’s performance exiting the most recent quarter was strong with comps up 11% on a two-year stack.
Similar momentum is expected to take place worldwide as the rest of the world ramps up their vaccination efforts.
“We are pretty optimistic about the back half of this calendar year,” he said.
Downtown store update
Starbucks has a heavy exposure in downtown hubs and near offices and these stores continue to experience softness, Johnson said. To address the continued weakness, Starbucks announced nearly a year ago it is modifying many stores to better focus on off-premise sales.
By fall, downtown office buildings will see a spike in people returning to work and the bounce in sales will further support the company’s recovery from the pandemic and become better positioned for growth in the coming years.