Starbucks cafe sales miss targets as growth cools, stock falls
By Lisa Baertlein
(Reuters) - Starbucks Corp (SBUX.O) on Thursday posted quarterly cafe sales growth that missed analysts’ estimates as demand fell in all major markets, sending its shares down 4 percent.
The world’s largest coffee chain said global sales at company-owned cafes open at least 13 months rose 4 percent in the fiscal third quarter ended June 26 from the year-ago period. That was well short of the 5.6 percent gain analysts had expected, according to research firm Consensus Metrix.
Sales at established cafes in the U.S.-dominated Americas region grew 4 percent, short of analysts’ call for a 6.1 percent gain, after rising 7 percent in the second quarter and 9 percent in the first quarter.
Transactions in U.S. Starbucks cafes, which contribute the lion’s share of company sales and profits, were flat for the quarter.
In a telephone interview, Chief Operating Officer Kevin Johnson attributed that to Starbucks’ Frappuccino hour promotion starting a week later than last year and a change to its rewards program that took away the incentive to split orders to get more points.
Johnson also said consumer uncertainty was rising due to geopolitical events including Brexit, security concerns and the U.S. presidential election.
Earlier on Thursday, Starbucks rival Dunkin’ Brands Group Inc (DNKN.O) also reported soft U.S. traffic for the latest quarter. Nigel Travis, chief executive of the company that owns the Dunkin’ Donuts and Baskin-Robbins brands, noted that there was “some kind of mini malaise in the industry.”
Starbucks, which is investing in mobile ordering and payments to serve customers faster, has been under fire from employees who say a recent move to cut labour hours has hurt take-home pay, morale and customer service.
Starbucks, which recently raised prices on some drinks, committed to increasing base pay by at least 5 percent for about 150,000 U.S. baristas and managers at company-operated stores, starting Oct. 3. The company, which also bolstered stock rewards for employees, said it would also move up merit increases originally slated for early 2017.
Net income rose 20 percent to $754.1 million, or 51 cents per share. Revenue was up 7 percent to $5.24 billion.
Analysts had expected earnings of 49 cents per share on revenue of $5.33 billion, according to Thomson Reuters I/B/E/S.
Starbucks shares fell $2.30 to $55.30 in extended trading.
(Reporting by Lisa Baertlein in Los Angeles; Editing by David Gregorio and Richard Chang)
