• Sales at Chinese Starbucks at least fell 44 percent in the three months ending July 3.
• China’s zero-Covid policy has made it difficult for individuals and businesses to resume normal operations.
• By the end of the year, Starbucks expects to have 6,000 locations open in China.

Sales at Chinese Starbucks at least fell 44 percent in the three months ending July 3.During a Tuesday analyst call to discuss the results, Belinda Wong, chairman of Starbucks China, said, “China faced its most severe COVID disruption since the onset of the pandemic.” “Under China’s zero-Covid policy, mobility restrictions and lockdowns were implemented faster and eased more slowly,” she said,

adding that Shanghai, Starbucks’ largest market, was completely shut down for about two-thirds of the quarter.

Starbucks’ international sales fell 18 percent in the third quarter, owing to poor performance in China. Discounting the drop in sales in that region, the company said Tuesday that international growth would have been in the double digits.

China’s zero-Covid policy has made it difficult for individuals and businesses to resume normal operations. This is a problem for Starbucks, which considers China to be one of its most important markets. Starbucks has approximately 5,760 Chinese locations and sees the region as a growth opportunity for the company.

Despite the difficult quarter, Starbucks interim CEO Howard Schultz stated on Tuesday that “our position in the market and our aspirations for the future have never been greater” in China.

According to Wong, the situation is improving as Covid restrictions loosen, noting that “we saw immediate improvement in traffic and sales following Shanghai’s reopening in early June.”

“We’re continuing our relentless focus on the long term even as we navigate short-term disruptions,” she added. By the end of the year, the company expects to have 6,000 locations open in China.

Starbucks is reconsidering its presence in other international markets. Starbucks announced earlier this year that it was leaving Russia permanently due to the conflict in Ukraine.

In July, the UK newspaper the Times reported that Starbucks was considering whether or not to sell its UK operations. Starbucks stated at the time that it was not in a “formal sales process” and reiterated its desire to remain in the region.

Sales have increased in the United States, where the company is fighting a building unionisation effort. In the third quarter, sales at US stores open at least 13 months increased by 9%.

Investors were pleased with the company’s overall results, despite the decline in China. Starbucks (SBUX) stock increased nearly 2% after hours on Tuesday.

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