The Bank of Russia unexpectedly maintained its key interest rate at a record-high 21% , defying analysts’ expectations of another significant hike as inflation remains stubbornly elevated. The decision marks a shift toward a more measured approach in balancing economic growth and price stability. Key Details Inflation Concerns: Annual inflation climbed to 8.9% in November, well above the central bank’s 4% target , with inflation expectations reaching 13.9% in December. Policy Rationale: The central bank cited the significant tightening of monetary conditions after October’s 200-basis point hike as sufficient to resume disinflationary processes. Governor Elvira Nabiullina emphasized avoiding both economic overheating and severe slowdowns. Economic Overheating: Elevated government spending on the war in Ukraine and social programs, coupled with labor shortages and rising wages, have fueled strong domestic demand, exacerbating price pressures...
Starbucks' operational improvements helped the coffee giant meet Wall Street expectations for quarterly profit, even as global sales declined due to persistent weakness in consumer spending in its key markets, the US and China.
Key Highlights:
- Quarterly Profit: Profit of 93 cents per share met LSEG estimates.
- Operational Efficiency: Starbucks rolled out the Siren System plan, updating equipment to increase service pace, deployed across US-operated stores. The company aims to have the system in less than 10% of global stores by year-end.
- Operating Margin: Fell by 70 basis points in the third quarter, a sequentially smaller drop.
- New Store Openings: Opened 526 new stores in the quarter.
Market Reaction:
- Starbucks' shares, down 22% this year, rose 5% in extended trading after executives reaffirmed annual forecasts.
Consumer Strategies:
- In response to cost-conscious consumers, Starbucks introduced discounts and promotions, including a coffee or tea paired with a butter croissant for US$5 in June and 50% off deals on Fridays in May.
Challenges in Key Markets:
- China: Same-store sales tumbled 14%, following an 11% drop in the second quarter, amid weak consumer spending and competition from local chains like Luckin' Coffee.
- International Sales: Missed expectations, reflecting trends seen by McDonald's and Domino's, with weakness in the Middle East, South Asia, and parts of Europe due to boycotts related to the war in Gaza.
CEO Statement:
- "We are focused on what we can control in a consumer environment that can be best described as complex," said CEO Laxman Narasimhan.
Investor Relations:
- Starbucks confirmed on a post-earnings call that Elliott Investment Management is a shareholder and that discussions with the activist investor have been "constructive."
Outlook:
- Starbucks reaffirmed its global and US comparable sales forecast in the range of a low single-digit decline to flat, with annual profit projected to range from flat to low-single digits.
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