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Starbucks profits disappoint on Omicron drag, inflation

Starbucks Corp (SBUX.O) missed estimates for quarterly profits and comparable sales on Tuesday as rising COVID-19 infections during December and fresh curbs hampered a recovery in China.

The fast-spreading Omicron variant has delayed office reopenings and worsened a labor crunch, hurting the Seattle-based chain which relies heavily on consumers picking up their coffees en route to work.

Shares of Starbucks were down more than 5% in extended trading, following a 16% drop last month.

Restaurants are paying more for everything from chicken and cooking oil to packaging amid record inflation, and many including Starbucks have raised wages amid the labor shortage.

The extra costs have eaten into margins. McDonald’s profits also missed estimates when it reported its fourth quarter earnings on Thursday. read more

Similarly, Starbucks reported profits of 72 cents per share, missing Wall Street estimates of 80 cents, according to Bernstein analysts.

Global comparable sales rose 13% in the first quarter ended Jan. 2, Starbucks said, while analysts polled by Refinitiv IBES had expected growth of 13.2%.

Same-store sales in the international division declined 3%, reflecting a 14% drop in China. Analysts had expected a 0.5% increase in the international segment.

Several Chinese cities have closed seating areas and restricted movement to curb COVID-19 ahead of the Winter Olympics, knocking the coffee chain’s revenue. The brand also came under fire in the country after a report said two of its stores used expired ingredients. read more

Comparable sales in the United States jumped 18%, benefiting from new cold beverages, higher prices and an increase in rewards members.

Total net revenue rose 19% to $8.1 billion, while analysts had expected $7.95 billion.

Reporting by Praveen Paramasivam in Bengaluru and Hilary Russ in New York; Editing by Devika Syamnath and Aurora Ellis

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