Annual sales at Starbucks are set to break through the $20bn mark this year – enough to buy a tall latte for everyone on the planet.
The world’s biggest coffee chain, headquartered in Seattle, is booming after improvements to food menus and service along with the launch of new drinks such as the Toasted Graham Latte.
Comparable sales – at cafes that have been open for at least a year – rose 8% in the firm’s fourth quarter, beating analysts’ expectations.
Half of that increase was due to customers paying more frequent visits to Starbucks cafes, the Seattle Times reported.
But Starbucks shares fell 3% as it became the latest company to warn about the effect of the strong dollar, which it said would hurt profits in its key holiday quarter.
Sales rose 17% to a record $19.2bn (£12.5bn) in the year to the end of September, and are set to reach $21bn in 2016 – roughly equivalent to every person on the planet buying a tall latte, which costs an average of $2.95 in US. Annual operating profits were up by 19% to $3.7bn.
The group did not break out its UK performance but earlier this year reported its first profit in the UK for 17 years. Along with other multinationals, Starbucks has come under fire for how little tax it pays in the UK.
Last week, the European commission ruled that the company’s sweetheart tax deal with Dutch tax officials amounted to unlawful state aid. Starbucks said it would appeal.
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The company said sales were unexpectedly strong in the Americas and the company’s Europe, Middle East and Africa division in the last quarter. But Asia disappointed as the Chinese economic slowdown sent ripples through the region. The KFC and Pizza Hut parent company, Yum Brands, has also been hit by China’s woes.
However, Starbucks said it had not seen a broad-based slowdown in China and still expected the world’s most populous country to become its largest market outside the US, with 3,400 cafes planned by 2019.
The chief executive, Howard Schultz, said service improved in the US after Starbucks raised staff pay and improved benefits. It introduced new delivery services and a app that allows customers to skip the queue by ordering and paying for their drinks with their smartphones. He added: “Starbucks is playing the long game.”
After being launched at US stores in late September, the company has started rolling out Mobile Order & Pay at 150 London cafes in the UK and 300 locations in Canada.
Neil Saunders, the chief executive of retail consultants Conlumino, said the app could lead to an increase in impulse purchases, which were easier to make via the app. Starbucks would also benefit from improved efficiencies through reduced waiting times and higher throughput, which was likely to boost profits.
“We are also encouraged by Starbucks’ plans to increase the productivity of stores in another way: by driving evening sales through offering alcoholic beverages and an enhanced food menu,” he said.
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