Starbucks Adjusts Sales Targets After Third Straight Miss
July 21 2016 - 5:08PM
Dow Jones News
By Maria Armental
Starbucks Corp. on Thursday revised its projections for the year
as sales in the June quarter again fell short of expectations,
dragged down by its European operations.
Shares, down 4% this year, fell 3% to $55.80 in after-hours
trading.
The Seattle-based coffeehouse chain, which has missed analysts'
sales targets for three consecutive quarters, now expects sales to
increase about 10%, with sales at stores open at least 13 months
increasing in the mid-single digits. That's a downward revision
from its previous guidance of revenue increasing by at least 10%
with comparable sales increasing "somewhat above the mid-single
digits."
Meanwhile, the company raised its profit forecast, saying it now
expects to make $1.88 to $1.89 a share, up from $1.85 to $1.86 a
share.
Domestic sales, which account for the bulk of business, drove an
overall revenue increase, easing concerns that customers would
spurn changes to the company's loyalty program that went into
effect in April.
Sales rose 8% in the U.S. while comparable sales, a closely
watched metric, rose 4% in the third quarter. The results, however,
suggest a slowdown from the year-ago period when Starbucks reported
increases of 13% and 8%, respectively.
Company officials have defended the changes, which link rewards
to spending rather than just number of visits, by saying they would
improve service by eliminating the incentive to split orders.
On Thursday, executives said that, at the end of the quarter,
the program had expanded to 12.3 million active members in the
U.S., an 18% increase from the year earlier.
Meanwhile, comparable sales in Europe, Middle East and Africa
fell 1%, against analysts' projected 2.8% increase, while China and
the Asia Pacific region saw a weaker-than-projected 3%
increase.
China, a key pillar in its international expansion with a target
of more than 3,400 stores by 2019, saw a 7% increase in comparable
sales.
Over all, Starbucks reported profit of $754 million, or 51 cents
a share, compared with $626.7 million, or 41 cents a share, a year
earlier. Excluding certain items, profit was 49 cents, compared
with 42 cents a year earlier and at the high-end of the company's
guidance.
Revenue rose 7% to $5.24 billion, below analysts' projected
$5.33 billion, according to Thomson Reuters.
Write to Maria Armental at maria.armental@wsj.com
(END) Dow Jones Newswires
July 21, 2016 16:53 ET (20:53 GMT)
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