Starbucks Closed Half of China Stores Amid Coronavirus Outbreak -- 2nd Update
January 28 2020 - 7:09PM
Dow Jones News
By Heather Haddon and Micah Maidenberg
Starbucks Corp. said customers in the U.S. helped to drive up
sales in its latest quarter, but the coffee chain faces a new
threat to business in China after temporarily closing more than
half of its stores in China because of the coronavirus
outbreak.
The Seattle-based company said Tuesday the closures in its
second-largest market would have an effect on the fiscal
second-quarter and full-year financial results. Starbucks had 4,292
stores in China at the end of last year, up 16% from 2018.
"We remain optimistic and committed to the long-term opportunity
in China," Chief Executive Kevin Johnson said.
Other chains including McDonald's Corp. and Yum China Holdings
Inc. also have closed stores in China as the virus has spread. The
outbreak has weighed on the shares of U.S. brands with big Chinese
footprints, along with the markets overall.
Starbucks said it is maintaining much of its fiscal guidance for
this year, rather than raising some portions, because of the
potential impact from the coronavirus.
"This is a very complex situation," said John Culver, the
company's head of international channel development and global
coffee and tea. "We are assessing this each and every day."
Shares in Starbucks fell 1% after hours after the chain reported
$7.1 billion in revenue for its fiscal first quarter, up 7% from a
year earlier and in line with estimates from analysts polled by
FactSet.
Comparable sales, or those from company stores open for at least
13 months and excluding currency fluctuations, rose 5%
globally.
The company said its comparable sales increased 6% in the U.S.
and 3% in China. The domestic market gain matched the company's
performance in its previous quarter, but growth in China was 2
percentage points slower than that period.
New-store construction in China fueled Starbucks's performance
there.
Growth in the company's digital loyalty program and new
beverages, particularly cold ones, bolstered sales globally,
Starbucks said. Strong holiday sales also boosted performance
during the quarter, according to the company.
Starbucks was helped in 2019 by in part by its lineup of cold
beverages, including nitro-cold brewed coffee drinks.
Fast-food chains including McDonald's and Dunkin Brands Group
Inc. have also introduced more cold coffees and stepped up their
offerings at breakfast, an increasingly competitive part of the
day.
Starbucks said it plans to introduce a plant-based breakfast
sandwich in the U.S. and Canada this year.
Starbucks reported a quarterly profit of $885.7 million, or 74
cents a share, up from $760.6 million, or 61 cents a share, a year
earlier. Its adjusted earnings of 79 cents a share was 3 cents more
than analysts expected.
Write to Heather Haddon at heather.haddon@wsj.com and Micah
Maidenberg at micah.maidenberg@wsj.com
(END) Dow Jones Newswires
January 28, 2020 18:54 ET (23:54 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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