SBUX Starbucks Corporation

By Julie Jargon 

Starbucks Corp. said it would close more coffee shops in the increasingly crowded U.S. market where it was a pioneer, sending shares sharply lower in trading Wednesday.

The company said the need for closures was driven in part by slowing sales in the U.S. Starbucks said Tuesday that it expects global same-store sales growth of just 1% in the current quarter, well below analysts' expectations of 2.9% growth, due not only to the weakness in the U.S. but also to worsening sales in China.

On Wednesday, shares of Starbucks fell nearly 9% to $52.50 in midday trading, and the stock was the worst performer in both the S&P 500 and the Nasdaq 100. If the slide continues, it could result in the lowest market close for Starbucks since November 2016.

The coffee giant said late Tuesday that it would close 150 U.S. stores in its 2019 fiscal year, triple the number it has closed on average in recent years. Starbucks said it also will slow the growth of licensed stores in airports, supermarkets and other retail stores, reflecting criticism that the coffee-shop pioneer was expanding too rapidly.

Sales at Starbucks stores in the U.S. have been slowing in recent years. Late last year, Starbucks reduced its long-term sales and profit targets. In April, Starbucks reported that traffic to its U.S. stores was flat in its fiscal second quarter.

Starbucks Chief Executive Kevin Johnson said his company still has room to grow in some parts of the U.S., such as the Midwest and the South. Most of the stores that will be closed are in more urban parts of the country where Starbucks stores are tightly clustered and where rent and wages are high, he said.

At an investor event on Tuesday, Mr. Johnson, who became chief executive last April, also sought to draw a distinction between his plans and those of Howard Schultz, the longtime CEO who recently said he is stepping down as chairman later this month. Mr. Johnson said he is more data-driven and analytical than Mr. Schultz.

Mr. Johnson said he plans to increase same-store U.S. sales by expanding the company's "digital relationship," with customers, which it has begun to do by opening its mobile order app to guests who aren't members of its rewards program. The chain also is giving rewards points to non-rewards customers who register a credit or debit card with the company.

Write to Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

June 20, 2018 12:21 ET (16:21 GMT)

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