Starbucks Tempers Revenue Forecast -- Update
January 26 2017 - 6:49PM
Dow Jones News
By Julie Jargon
Starbucks Corp. says it has become a victim of the success of
its mobile order app.
The coffee chain created the app to reduce long lines at the
cash register, but Starbucks Operating Chief Kevin Johnson said
Thursday the lines have just shifted to the pickup counter.
"The success of mobile order-and-pay has created a new
challenge," Mr. Johnson said in an interview.
Mr. Johnson, who will become chief executive in April when
Howard Schultz steps down to focus on building high-end Starbucks
stores, said long waits have driven away some potential customers.
The number of transactions in the company's fiscal first quarter
were down as a result.
Starbucks posted a 3% increase in U.S. same-store sales growth
in the quarter ended Jan. 1, but analysts were expecting 4% growth.
It marks the company's fifth consecutive quarter of missed
expectations for same-store sales in the U.S., its largest market.
Growth came from a 5% increase in the price of an average purchase,
offset by a 2% decline in transactions.
U.S. sales have slowed repeatedly in recent quarters. Starbucks
previously blamed the economy. The company has said it would return
to its historic same-store sales growth rate of 5% in the U.S.,
though it hasn't said when.
Mobile order-and-pay represented 7% of U.S. company-operated
transactions in the quarter, up from 3% in the prior year. The
number of its highest-volume stores for mobile order-and-pay, where
orders placed via the app account for more than 20% of transactions
during peak hours, doubled to 1,200 stores over the prior
quarter.
Mr. Johnson said the company plans to fix the problem with
better signage, text messages telling customers when their orders
are ready, and the deploying of employees to hand off mobile
orders.
Starbucks lowered its revenue forecast for the year while
posting revenue for the latest quarter below expectations. Shares,
up 5.3% this year through Thursday's close, fell 4.4% after hours
to $55.90.
The company expects revenue growth for 2017 of 8% to 10%,
compared with prior guidance for double-digit growth. Starbucks
backed its guidance for earnings of $2.12 to $2.14 a share.
Starbucks earned $751.8 million, or 51 cents a share, up from
$687.6 million, or 46 cents, the year before. Excluding certain
items, profit rose to 52 cents a share from 46 cents a share a year
earlier.
Revenue rose 6.7% to $5.73 billion. Analysts surveyed by Thomson
Reuters had forecast earnings of 52 cents on $5.85 billion in
sales.
Starbucks reported that global same-store sales rose 3% in the
quarter. Same-store sales in Europe, Middle East and Africa
declined 1% from the year-ago period. The company said that number
only includes company-owned Starbucks and that many stores in that
market have become licensed by other operators and aren't counted
in that result.
China and the Asia Pacific region posted a 5% same-store sales
increase. China, expected to overtake the U.S. as the chain's
largest market, posted a 6% increase in same-store sales.
--Anne Steele contributed to this article.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
January 26, 2017 18:34 ET (23:34 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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