Starbucks outpaces earnings estimates but warns coronavirus could hit fiscal 2020


Starbucks President and Chief Executive Officer Kevin Johnson is pictured at the Annual Meeting of Shareholders in Seattle, Washington on March 20, 2019.

Jason Redmond | AFP | Getty Images

Starbucks on Tuesday reported quarterly earnings that beat analysts’ expectations, but investors focused on its warning that the Wuhan coronavirus outbreak could deal a blow to its fiscal 2020 outlook.

Shares of the company fell less than 1% in extended trading.

The coffee chain said it has closed more than half of its Chinese locations but expects that it will be temporary.

“As we begin our fiscal second quarter, I want to acknowledge the dynamic situation our partners in China are navigating as health officials respond to the coronavirus,” CEO Kevin Johnson said in a statement. “As events unfold, we will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results.”

Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by Refinitiv:

  • Earnings per share: 79 cents, adjusted, vs. 76 cents expected
  • Revenue: $7.1 billion vs. $7.1 billion expected
  • Global same-store sales: 5% vs. 4.4% expected

Starbucks reaffirmed its fiscal 2020 forecast but said it was excluding the impact of coronavirus. Under its current forecast, its fiscal 2020 revenue is expected to rise between 6% and 8% and global same-store sales growth will be in a range of 3% to 4%.

“The company will update its guidance for fiscal 2020 when we can reasonably estimate the impact of the coronavirus,” Starbucks said in the earnings release.

The company also said that it expects that the virus will “materially affect” its results for the fiscal second quarter and fiscal 2020.

The concerns over the spreading outbreak overshadowed a solid fiscal first quarter that included one of its strongest holiday seasons ever.

The global coffee chain reported fiscal first-quarter net income of $885.7 million, or 74 cents per share, up from $760.6 million, or 61 cents per share, a year earlier.

Excluding the impact of restructuring and impairment costs and other items, the global coffee chain earned 79 cents per share, topping the 76 cents per share expected by analysts surveyed by Refinitiv.

Net sales rose 7% to $7.1 billion, meeting expectations. U.S. same-store sales increased by 6%, boosted by more customers visiting its cafes. The company attributed the traffic bump to the popularity of new cold drinks, like the Pumpkin Cream Cold Brew and the Irish Cream Cold Brew, timed for the holiday season.

About 1.4 million U.S. customers joined Starbucks’ loyalty program, up 16% from a year ago. Starbucks Rewards now counts 18.9 million Americans as active members.

Sales at Chinese locations open at least a year increased by 3% as Starbucks faces greater competition. Chinese rival Luckin Coffee, which recently surpassed Starbucks as the largest coffee chain in China, has been putting pressure on business in Starbucks’ second-largest market. Starbucks expects to add 2,000 net new locations worldwide in fiscal 2020.

Mobile orders in China accounted for 15% of China’s total revenue, up 10% from the previous quarter. Delivery accounts for 9% of those sales. Starbucks has a delivery partnership with e-commerce giant Alibaba in China, where beverage delivery is more popular than in the U.S.

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