Starbucks sales miss as virus spike keeps customers at home

Starbucks Corp on Tuesday reported a larger-than-expected fall in quarterly sales as the renewed surge in coronavirus cases in the United States kept customers at home.

The world’s largest coffee chain’s global same-store sales fell 5 percent in its first quarter, which ended Dec. 27, more than analysts’ estimates of a 3.4 percent decline, according to Refinitiv IBES data.

Shares fell slightly in extended trading.

The second wave of COVID-19 infections and accompanying restrictions dented traffic at the coffee chain’s stores, hampering its efforts to boost demand through product launches and new drive-thrus.

Comparable sales declined 6 percent for the Americas region, compared with a 5.2 percent fall expected by analysts.

But in China, Starbucks’ biggest growth market, comparable sales rose 5 percent as the company benefited from the popularity of its rewards program and the return of pre-coronavirus consumer habits.

Customers also spent more money per order, helping to offset fewer transactions.

Starbucks also said Chief Operating Officer Roz Brewer would be leaving the company next month to take a chief executive officer role at another company.

Walgreens Boots Alliance Inc later announced that Brewer would take the helm at the company effective March 15.

For the second quarter, Starbucks said it expects U.S. comparable sales to rise between 5 percent and 10 percent, while in China they were forecast to grow nearly two-fold a year after the pandemic hit the region.

The company did not change its guidance of an expected rebound overall this year, with global comparable sales expected to rise 18 percent to 23 percent in 2021.

Net revenue fell 5 percent to $6.7 billion, missing expectations of $6.93 billion.

The Seattle-based company has been closing some stores, adding drive-thrus to others, remaking some with smaller cafes and building a few with no seating at all as it focuses on expanding to-go options.

Overall, the company opened 278 net new stores in the quarter, for 4 percent year over year growth. It now has 32,938 stores around the world, 51 percent of which are company-operated.

Starbucks also saw coffee lovers return to its Rewards loyalty program, with its count of 90-day active U.S. members increase 15 percent year over year to 21.8 million.

-reuters-

Starbucks sales and profit forecast disappoint, shares drop

Starbucks Corp cut its profit forecast and posted disappointing quarterly results on Thursday, amid a bitter battle with competitors ranging from boutique coffee seller Intelligentsia to lower-price rivals like McDonald's.

Investors, long used to Starbucks exceeding investor expectations, sent shares down 7.3 percent to $50.85 in after-hours trade.

The Seattle-based coffee chain said it now sees long-term earnings per share growth of 12 percent or greater, versus its prior call for growth of 15 percent to 20 percent.

Fourth-quarter revenue missed Wall Street's target after sales at established global cafes gained 2 percent, less than analysts' average target of 3.2 percent, according to Consensus Metrix.

Hurricanes Harvey and Irma battered same-store sales at more than 1,100 US cafes. Sales at mainstay US cafes were down 2 percent for the quarter that ended October 1, excluding the hurricane impacts, they would have been up 3 percent - still just short of analysts' estimate.

Analysts have warned that the Seattle-based company is being "middled" by rising competition on the value and quality fronts and that it must bolster sales of higher-priced specialty drinks and breakfast sandwiches.

Chief Executive Kevin Johnson told Reuters in an interview that there was no evidence Starbucks was being hit by competition. "We are not going to be squeezed in the middle," he said.

Johnson noted that US restaurants in general are seeing declining traffic and said that the one area where the company has seen softness is in the afternoons, particularly with regard to sales of its blended beverages such as frappuccinos.

Still, US convenience stores and fast-food chains are improving quality and pricing aggressively.

McDonald's Corp recently expanded its McCafe menu with new macchiatos and lattes and is selling small McCafe espresso drinks for $2. Elsewhere, Dunkin' Brands Group Inc is offering special deals on breakfast sandwiches in its bid to win breakfast.

At the same time, upscale craft coffee rivals like Nestle SA's Blue Bottle and Intelligentsia are opening more shops.

The number of competing coffee shops within one mile of Starbucks shops in several large US markets has increased in recent years, BMO Capital Markets analyst Andrew Strelzik said in a note before the earnings.

Adding to the pressure, Strelzik said, Starbucks continues to build its own US stores at the risk of cannibalizing sales.

Johnson, who succeeded Starbucks co-founder Howard Schultz as chief executive in April, is under pressure to continue serving up the kind of growth that Wall Street has come to expect from the world's biggest coffee chain.

In the last 12 months, Starbucks shares are up about 4 percent, while the S&P 500 index is up more 20 percent.

Starbucks' stock has been trading at a price-to-earnings ratio of 27.8, slightly above McDonald's and Dunkin' Brands, but well below the 52.74 ratio for Chipotle Mexican Grill Inc , according to Thomson Reuters data.

Total net revenue decreased 0.2 percent to $5.70 billion, compared with analysts' revenue target of $5.80 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to the company fell to $788.5 million, or 54 cents per share, in the latest quarter, from $801 million, or 54 cents per share, a year earlier.

Excluding items, it earned 55 cents per share, in line with Wall Street targets.

Starbucks in the third quarter of 2016 changed the basis of its loyalty program to dollars spent from number of orders because customers were buying items individually to get more points. Traffic statistics fell when customers resumed ordering items together.

Labor pressure is also heating up.

Starbucks has been adding working hours at some US stores to ease backups caused by a flood of mobile orders. Meanwhile, cities and states are boosting the minimum wage and a tightening labor market is forcing some chains to increase pay and benefits to recruit and retain workers.

Same-store sales from China were up 8 percent, but the broader China and Asia Pacific region posted a rise of 2 percent, versus expectations of 3.2 percent.

source: news.abs-cbn.com