Starbucks Misses on Revenue Despite Record Quarter -- 2nd Update
January 25 2018 - 7:08PM
Dow Jones News
By Julie Jargon and Aisha Al-Muslim
Starbucks Corp.'s domestic business is struggling despite signs
that the broader economy is strengthening.
Like other food and beverage retailers, Starbucks has
experienced slowing sales in the U.S. as the coffee market has
grown crowded. Consumers have more options for their caffeine fix,
from high-end gas station coffee to cold bottled coffee sold in
supermarkets.
Starbucks said it expects the resulting slow traffic to extend
into its second fiscal quarter.
Chief Executive Kevin Johnson said the company is trying to
broaden its customer base by opening up mobile ordering and payment
to people who aren't part of its loyalty program. Starting in
March, anyone will be able to use the coffee chain's mobile
app.
Starbucks said it added 1.4 million active Starbucks Rewards
members in the U.S. in the quarter, bringing the total up 11%
year-over-year to 14.2 million. The company has been trying to use
the program, mobile ordering and digital marketing to draw
customers in more often. "Our ability to reach a larger percentage
of customers with mobile is a big opportunity," Mr. Johnson said in
an interview.
The chain is also trying to draw in people during the slower
afternoon period with discounted items and promotions.
Starbucks posted a 2% rise in same-store sales in its home
market and globally in its first quarter. Analysts polled by
FactSet expected Starbucks to post a 3% increase in global
same-store sales for the quarter, with a 3.2% increase in the
Americas.
Mr. Johnson said same-store sales in the U.S. took a hit in the
quarter in part because of holiday merchandise sales that fell
short of expectations.
The bright spot in the quarter was China, where Starbucks stores
posted 6% same-store sales growth and 30% revenue growth.
Starbucks's per-share earnings got a 79-cent boost from its move
to acquire the remaining 50% stake in its East China joint venture.
At year-end Starbucks had more than 3,100 company-owned stores in
China. Last year, the company also closed a deal to sell its
interest in a Taiwan joint venture, which helped its bottom
line.
Overall, Starbucks reported a profit of $2.2 billion, or $1.57 a
share, compared with $751.8 million, or 51 cents a share, in the
year-ago period. Excluding items such as a tax benefit and proceeds
from the sale of its Tazo brand to Unilever, Starbucks earned 58
cents a share, beating expectations by 1 cent. Revenue rose 6% to
$6.1 billion.
The company said that the majority of savings from a lower
corporate tax rate will go to the bottom line. The chain plans to
invest some of the savings into increased wages and expanded
employee benefits.
Write to Julie Jargon at julie.jargon@wsj.com and Aisha
Al-Muslim at aisha.al-muslim@wsj.com
(END) Dow Jones Newswires
January 25, 2018 18:53 ET (23:53 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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