Starbucks Gives Soft Profit Outlook--2nd Update
January 21 2016 - 6:40PM
Dow Jones News
By Julie Jargon
Starbucks Corp.'s investments in mobile technology and strong
sales of Christmas merchandise helped the coffee giant post
better-than-expected first-quarter earnings. But its outlook for
the current quarter disappointed investors, pushing its shares
lower.
The company forecast adjusted earnings of 38 cents to 39 cents a
share for its fiscal second quarter, below Wall Street's forecast
of 40 cents, according to Thomson Reuters.
Starbucks shares fell 4.1% to $56.60 in after-hours trading.
The disappointing outlook came as the retailer reported an 8%
increase in global same-store sales for the quarter ended Dec. 27,
topping analysts' forecast for 7.3% growth.
Starbucks' mobile investments, which have made it easier for
customers to order and buy coffee, and robust Christmas sales
helped insulate the company from the challenges other
bricks-and-mortar retailers faced over the holidays.
Nearly 22% of the company's U.S. transactions in the quarter
were conducted using the company's mobile payment app. Starbucks
hasn't broken out transactions made specifically from the mobile
order part of the app, which was rolled out nationally in
September. But Starbucks posted the strongest growth during its
critical morning business in the U.S. in more than five years and
the mobile order and pay app was the single biggest contributor to
that growth, Chief Financial Officer Scott Maw said in an
interview.
Strong gift card sales during the holidays also bolstered
Starbucks' results. Despite an online brouhaha in which critics
claimed the chain's unadorned red holiday cups meant Starbucks was
anti-Christmas, the chain sold a record number of Starbucks cards
for the Christmas quarter.
The amount of money downloaded on Starbucks cards in the U.S.
and Canada rose 18% to $1.9 billion in the company's fiscal first
quarter, which means one out of every six Americans received a
Starbucks card over the holidays, up from one in seven in the
year-ago period, Chief Executive Howard Schultz said in an
interview.
Starbucks cafes also for the first time sold out of packaged
Christmas blend coffee.
Mr. Schultz doesn't credit the red-cup controversy for the
strong gift card and Christmas coffee sales, but said the attention
didn't hurt. "Clearly it elevated Starbucks in the zeitgeist of
culture," he said.
In the latest quarter, same-store sales in the Americas
division, which includes the U.S., Canada and Latin America, rose
9%. Analysts had forecast 7.7% growth.
But growth trailed expectations in the company's China and Asia
Pacific division. Same-store sales rose 5%, below the 6.1% growth
analysts had forecast. Starbucks has set a torrid pace of growth in
Asia in recent quarters, but concerns are mounting over a slowdown
in China's economy. Still, Starbucks opened more than 150 cafes in
China in the first quarter.
The Seattle company's division that includes Europe also
disappointed investors, posting 1% same-store sales growth against
analyst estimates for a 4.5% gain. The company blamed the weakness
in its European business on declining customer visits in the
aftermath of the Paris terrorist attacks in November.
Overall, Starbucks reported earnings of $687.6 million, or 46
cents a share, down from $983.1 billion, or 65 cents a share, a
year earlier. The prior-year period was boosted by a $391 million
gain related to a joint venture.
Starbucks had forecast earnings of 44 cents to 45 cents a
share.
Revenue rose 12% to $5.37 billion. Analysts had forecast $5.39
billion in revenue.
Starbucks backed its forecast for full-year adjusted earnings of
$1.87 to $1.89 a share and same-store sales growth just above the
mid-single digits in percentage terms.
Chelsey Dulaney contributed to this article.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
January 21, 2016 18:25 ET (23:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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