Starbucks sales in China fell due to Covid restrictions

In the three months ending July 3, sales at Chinese Starbucks locations that were open at least 13 months ago fell 44%.

“China is facing the most severe COVID disruption since the start of the pandemic,” Belinda Wong, chairman of Starbucks China, said this quarter during a call with analysts on Tuesday when the results were discussed. “Movement restrictions and lockdowns were put in place faster and eased slower as part of China’s COVID-19 policy,” she said, adding that Shanghai, Starbucks’ largest market, was completely locked down for about two-thirds of the quarter.

Starbucks’ international sales for the quarter fell 18% due to poor results in China. The company said Tuesday that aside from falling sales, international growth would have been double-digit.

China’s coronavirus policy has prevented individuals and companies from returning to business as usual. This is a problem for Starbucks, for which China is one of the most important markets. Starbucks has about 5,760 locations in China and points to the region as a growth opportunity for the brand.

Even in light of a challenging quarter, “our market position and our aspirations for the future have never been better” in China, Starbucks acting CEO Howard Schultz said in a phone call Tuesday.

The situation is improving as Covid restrictions are eased, Wong said, noting that “we saw an immediate improvement in traffic and sales after Shanghai reopened in early June.” She added that “we continue to relentlessly focus on the long term, even with short-term disruptions.” By the end of the year, the company plans to open 6,000 offices in China.

In other international markets, Starbucks is redefining its presence. Earlier this year, Starbucks said it was leaving Russia for good because of the war in Ukraine.
And the UK newspaper The Times said in July that Starbucks is considering selling its business in the United Kingdom. At the time, Starbucks said it was not in the “official sales process” and confirmed that it wanted to stay in the region.
In the United States, where the company is fighting construction unions, sales are on the rise. Sales at US stores open for at least 13 months jumped 9% in the quarter.
Despite the downturn in China, investors were pleased with the company’s overall results. Starbucks (SBUX) shares jumped nearly 2% after hours on Tuesday.

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