It was a happy holiday at Starbucks, but the coronavirus outbreak in China could slow the company’s sales momentum
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 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% 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 6% to 8% range and same-store sales growth of 3% to 4%.
“We remain optimistic and committed to the long term growth potential in China,” Starbucks President and CEO Kevin Johnson said in a conference call Tuesday with analysts.
Starbucks shares fell 1.6% to $87.20 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-story Reserve Roastery in Chicago — which opened in 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% to $886 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 5% worldwide in the October-December period, ahead of analysts’ forecast of 4.4%. Revenue was up 7% to $7.1 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 pickup locations in the U.S. after the successful opening of a small-format store in New York during the quarter. Mobile ordering and payment represented 17% of U.S. sales in the first quarter.