Starbucks’ results top estimates but coronavirus slows sales

AP – It was a happy holiday at Starbucks, but the company’s sales momentum could start to slow due to the coronavirus outbreak in China.

Starbucks said it had intended to raise its full-year earnings guidance on Tuesday, but uncertainty about China put that on pause. Starbucks said it has already closed more than half of its stores in China due to coronavirus.

China’s 4,292 Starbucks stores brought in 10 per cent of the company’s revenue during the October-December period, so the closure will affect earnings, the company said. But it’s not yet clear how much of an impact there will be. Starbucks had expected full-year revenue growth in the six per cent to eight per cent range and same-store sales growth of three per cent to four per cent.

“We remain optimistic and committed to the long term growth potential in China,” Starbucks President and CEO Kevin Johnson said in a conference call on Tuesday with analysts.

Starbucks shares fell 1.6 per cent to USD87.20 in extended trading following the earnings report.

Johnson said the holiday season was one of the best in the company’s history. New drinks like the Pumpkin Cream Cold Brew were a hit with customers. Starbucks’ new four-storey Reserve Roastery in Chicago — which opened last November — is serving an average of 10,000 visitors each day, he said. A combination of new stores and solid foot traffic helped the Seattle-based coffee giant handily beat Wall Street’s forecasts in the October-December period. The company opened 539 net new stores in its fiscal first quarter. It now has nearly 32,000 stores worldwide.

Starbucks’ earnings rose 16 per cent to USD886 million in the fiscal first quarter. Earnings, adjusted for non-recurring items like restructuring charges, were 79 cents per share. That beat Wall Street’s forecast of 76 cents.

Starbucks said same-store sales — or sales at stores open at least 13 months — jumped five per cent worldwide in the October-December period, ahead of analysts’ forecast of 4.4 per cent. Revenue was up seven per cent to USD7.1 billion, in line with analysts’ forecasts.

Starbucks Chief Operating Officer Roz Brewer said she’s confident the company can sustain that momentum because of new products and technology in the pipeline. Starbucks is adding new equipment to stores to improve its cold brew process, she said. The company also plans to introduce a plant-based sausage sandwich at breakfast and more non-dairy milks based on customer requests, she said.

Starbucks also plans more mobile order and pick-up locations in the United States (US) after the successful opening of a small-format store in New York during the quarter. Mobile ordering and payment represented 17 per cent of US sales in the first quarter.

Baristas prepare drinks at a Starbucks on South Claiborne Ave in New Orleans. PHOTO: AP