Starbucks misses quarterly sales estimates, China sales buoy

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A Starbucks sign is shown on one of the company's stores in Los Angeles, California, U.S. October 19, 2018. REUTERS/Mike Blake/File Photo Aug 1 (Reuters) - Starbucks (SBUX.O) missed market expectations for quarterly comparable sales on Tuesday, with demand for its coffees and cold drinks both in the North American and international markets showing some signs of tapering even as China sales rebounded. Shares of the Seattle, Washington-based company fell marginally in extended trading even as it topped Wall Street estimates for quarterly profit, helped by higher prices and easing cost inflation. While Starbucks has rushed to cash in on its younger, wealthier customer base by launching new drinks in the United States, including a Chocolate Java Mint Frappuccino and White Chocolate Macadamia Cream Cold Brew this year, its quarterly transactions climbed just 1% in North America, slowing from a 6% increase in the previous quarter. However, the company saw a sharp recovery in China, with comparable sales surging 46% even as the average amount spent per customer during a store visit declined 1% in the quarter. While the 7% rise in North America comparable sales was "definitely a light number relative to expectations... people are really looking at this rebound that (Starbucks is) seeing in China... China I think is what's holding the stock up here," said Sante Faustini III, director of product intelligence at research firm M Science. The movement of people throughout China -- tracked through subway rides -- rose roughly 128% in the second quarter and returned to 2019 pre-pandemic levels, according to analysts at BofA Global Research, noting sales trends at Starbucks typically coincide with subway traffic data. Global comparable sales at Starbucks rose 10% in the third quarter, compared with analysts' expectations for a 11.8% rise, according to Refinitiv IBES data. In its international segment, same-store sales rose 24%, also missing estimates of 25.7%. Still, the company expanded its operating margin to 17.4% in the quarter ended July 2, from 16.9% in the prior year, as easing costs of commodities helped offset impact from increased investment in wages and worker benefits. Excluding items, Starbucks posted a profit of $1 per share, beating analysts' average estimate of 95 cents. Reporting by Deborah Sophia in Bengaluru and Kailyn Rhone in New York; Editing by Devika Syamnath and Susan Heavey Our Standards: The Thomson Reuters Trust Principles.