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Starbucks key sales figure disappoints; shares fall

/ 08:08 AM January 26, 2018

AFP FILE PHOTO

 

NEW YORK — Starbucks reported disappointing sales growth in its most recent quarter, and shares of the coffee chain fell in after-hours trading on Thursday.

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But the company also said it expects to earn more this year than it had previously expected, due to the recent changes in United States tax law that slashed the corporate tax rate.

Looking ahead, the company said it will focus on streamlining its business, like the recent sale of its Tazo tea brand, but it didn’t provide details. It also wants to lure more customers to buy coffee and food in the afternoon, and it will focus on opening more stores in China, its fastest-growing market.

Starbucks said sales rose 2 percent at established stores worldwide during its fiscal first quarter, missing the 3 percent growth analysts expected, according to FactSet. It was also below the 3 percent growth the company posted in the same quarter a year ago.

CEO Kevin Johnson said that mugs, tumblers and other merchandise in Starbucks stores did not perform well during the holidays. He said the company would reconsider what merchandise it sells in the future.

Because it will spend less on taxes, Starbucks said it now expects full-year earnings between $2.48 per share and $2.53 per share, up from its previous forecast between $2.30 per share and $2.33 per share.

Earlier this week, Starbucks also said that it would spend some of its tax savings by giving its 150,000 workers – including baristas and store managers – raises, stock grants, and expanded benefits.

The company’s profit soared in the quarter, but most of that gain came from the Tazo tea brand sale and its takeover of 1,400 stores in China that were previously part of a joint venture.

It reported net income of $2.25 billion, or $1.57 per share, in the three months that ended December 31, 2017. That compares with $751.8 million, or 51 cents per share, in the same period a year ago.

Earnings, adjusted for non-recurring gains, came to 65 cents per share, beating the 57 cents per share analysts expected, according to Zacks Investment Research.

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Revenue rose 6 percent to $6.07 billion, which still fell short of Street forecasts. Analysts expected revenue of $6.14 billion, Zacks also said.

After the results were released, shares of Starbucks Corp. fell nearly 5 percent to $57.55 in after-hours trading.                       /kga

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