Starbucks reports higher profits, but Omicron adds costs

NEW YORK: Starbucks reported higher quarterly profits Tuesday, but said an unexpectedly costly hit from the latest Covid-19 wave would lead to further price increases.

The coffee chain scored higher comparable store sales in the United States in the quarter ending January 2, but lower sales internationally, with a big drop in China in the wake of that country's "zero Covid policy."

In its home market, Starbucks experienced "very strong" consumer demand over the holidays, Chief Executive Kevin Johnson told analysts.

But Johnson said Omicron weighed on the US results, leading to staffing shortages in its distribution and transportation network and higher Covid isolation pay for employees who became sick.

Starbucks to nearly double spending with diverse suppliers by 2030

The latest virus wave also exacerbated staff turnover issues, a bigger problem throughout the pandemic, company officials said.

In light of the higher costs, Starbucks plans additional price increases "though the balance of the year," Johnson said.

For the quarter, profits jumped 31.1 percent to $815.9 million on a 19.3 percent rise in revenues to $8.1 billion.

John Culver, the company's chief operating officer, said Starbucks employs analytics in implementing price increases and has not seen "any meaningful impact" to demand following two earlier rounds of price hikes.

Shares fell 1.0 percent to $97.80 in after-hours trading.