The biggest coffee chain in the world, Starbucks (NASDAQ:SBUX), has reported record annual profits for the year. The result declared on Thursday was more impressive because the restaurant business has generally slumped recently.
Operating income of the business stands at $4.2 billion, which is 16 percent more than last year. Net sales in the United States, which is their biggest market and one that gives the business the most revenues, have gone up by an impressive 11 percent. But there is still a slight cause for worry because the global sales of Starbucks have increased by just 4 percent in the fourth quarter. Analysts had predicted that it should be around 4.9 percent.
Starbucks Doing Very Well in China
The business has in recent times, opened several more coffee shops around the world, sometimes through their many subsidiaries, in Asian countries like India, China, Sri Lanka, Malaysia, Lebanon, Kuwait, Thailand, Indonesia, and also elsewhere such as Romania, Russia, Greece, Slovakia, Finland, Morocco, and other countries.
But much of the company’s growth is coming from China, though it is still behind the United States by numbers. But that can change soon if Starbucks keeps growing the way it is in the Far East.
In fact, the Asia-Pacific region and China have grown the fastest at 23 percent this year. Howard Schultz, the CEO, said that their Chinese stores were the most lucrative and efficient. Starbucks (NASDAQ:SBUX) announced last month they will double the number of stores in China to 5,000 within 2021.
Online Shopping Hurting Starbucks
Howard further added that China will give Starbucks the growth it needs for “decades to come”, which is important because they were facing “ongoing economic, consumer and geopolitical headwinds”. Some time back, he had issued a warning saying that fewer people were now visiting malls or shopping streets, as many preferred to stay home and make purchases online. And of course, coffee cannot be served online.
Sales in Africa, the Middle East, and Europe have actually come down by 1 percent in the last quarter of the year. Starbucks has, on the other hand, grown by 1 percent in the Asia Pacific and China.
Outlook for the US was average to negative, but the company revealed that sales at many established cafes in the United States are “strengthening slightly”. The 2017 earnings have been forecasted to be between $2.12 and #2.14 for each share.