Coverage: More people are drinking Starbucks

Starbucks Inc. on Thursday reported earnings that outpaced analyst expectations and raised its outlook for the year, as customers spent more at its cafes in the U.S. and sales growth in China was stronger than expected.

Amelia Lucas of CNBC.com had the news:

“We are especially pleased with our comparable store sales growth in our two lead markets, the U.S. and China, where we are also continuing to drive strong new store development with industry-leading returns,” CEO Kevin Johnson said in a statement.

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

• Earnings per share: 60 cents, adjusted, vs. 56 cents expected
• Revenue: $6.31 billion vs. $6.32 billion expected
• Same-store sales: 3% vs. 2.9% expected

The coffee chain reported fiscal second-quarter net income of $663.2 million, or 53 cents per share, up from $660.1 million, or 47 cents per share, a year earlier.

Heather Haddon of The Wall Street Journal reported that it also boosted China sales:

Starbucks said Thursday same-stores sales grew by 3% during its fiscal second quarter. Sales were up 4% in the company’s Americas region and 3% in China, its second-biggest market.

Chief Executive Kevin Johnson has focused on streamlining the chain’s operations since taking over two years ago. He has pushed Starbucks to boost digital efforts, including its delivery and loyalty programs.

Last week, Starbucks rolled out a revamped loyalty program that allows customers to accrue freebies sooner. Some customers, though, are complaining online that the new approach penalizes heavy users because it eliminates some premium benefits to spread rewards to more consumers.

Starbucks executives on Thursday played down those complaints. The company said Starbucks Rewards members accounted for more than 40% of transactions in the U.S. during the quarter.

Kate Taylor of Business Insider reported that transactions at Starbucks remained flat:

While US comparable sales grew 4% in the quarter, the increase was driven entirely by an increase in average ticket size, with transactions remaining flat. Beverage sales contributed 3% of the total 4% growth in American same-store sales.

Starbucks has struggled to grow transactions in the US in recent years. Transactions were flat in the US in the last quarter after two quarters of decline.

Analysts have been pushing for Starbucks to address its inability to draw more people into coffee shops across the US.

“To us, this is an important step in the right direction, as we believe that it will be imperative for SBUX to truly fix its traffic problem in the U.S. for the stock to work l.t.,” or long term, Wells Fargo’s Bonnie Herzog said in a note in January.