Starbucks said it will raise menu prices in 2022 and reduce some spending to offset soaring costs for labour and goods, as rising Covid-19 cases prompted the coffee chain to lower estimates for profits this year.
The company missed estimates for quarterly profits and comparable sales as the fast-spreading Omicron variant also led to delayed office reopenings and new restrictions in China, the company's fastest growing market.
Shares fell slightly in extended trading, following a 16% drop last month.
Restaurants are paying more for everything from chicken and cooking oil to packaging and transportation services amid record inflation and Covid-19 disruptions, and many, including Starbucks have raised wages amid the labour shortage.
The extra costs have eaten into margins. McDonald's profits also missed estimates when it reported its fourth quarter earnings last week.
Similarly, Starbucks reported profits of 72 cents per share, missing Wall Street estimates of 80 cents.
The company also revised its expected adjusted earnings per share growth forecast for 2022 to 8-10%, from at least 10% previously.
The Seattle-based chain - whose workers in more than 50 of its US stores are seeking to unionise - has also paid more to train new employees and for them to isolate after exposure to Covid-19.
"When the Omicron surge began, inflationary costs and staffing shortages were amplified, well in excess of our expectations," chief executive Kevin Johnson said during a call with investors.
After increasing menu prices in October and January, the chain plans to raise them again in 2022 and will cut spending on marketing and promotions, Johnson said.
Starbucks did not specify the products for which it would raise prices.
Global comparable sales rose 13% in the first quarter ended January 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.
Comparable sales in the United States jumped 18%, benefiting from new cold beverages, higher prices and an increase in rewards members.
Starbucks said its total net revenue rose 19% to $8.1 billion, while analysts had expected $7.95 billion.
