Starbucks Posts First Sales Fall Since 2009 as Many Sites Close -- WSJ
April 29 2020 - 3:02AM
Dow Jones News
By Heather Haddon
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 29, 2020).
Starbucks Corp. said global same-store sales dropped 10% in its
second quarter as a result of the coronavirus crisis, the first
downturn by that measure in nearly 11 years.
The coffee giant said Tuesday that it expects the impact of the
pandemic to be even larger in its current quarter, and to continue
to depress its business to a lesser extent later in the year. The
Seattle-based company said it expects the virus's impact to be
temporary and that its business will eventually recover. Starbucks
has suspended guidance across its business for its fiscal year.
Starbucks said it was suspending share repurchases and reducing
expenses it can postpone given the virus's impact on its business.
The company will continue to pay quarterly dividends.
Starbucks has taken some of the strongest measures among
restaurant companies to safeguard workers and customers in response
to the virus. It was one of the first national chains to restrict
dine-in service, eventually shifting nearly all of its sales to
drive-through and delivery. It has paid workers at company-owned
stores to quarantine and compensated employees who chose to stay
home for 30 days rather than work.
Those measures have come at a cost. Starbucks said the pandemic
cut its profit in the Americas by $450 million as it lost sales,
spent on safety supplies and boosted wages for workers. Starbucks's
earnings per share adjusted for unforeseen expenses, including the
added worker pay, came to 32 cents a share. Analysts polled by
FactSet had expected adjusted earnings of 34 cents a share.
"The financial impacts of Covid-19 are very material," Chief
Financial Officer Patrick Grismer said.
The company's shares declined 1% to $78.
Roughly 50% of Starbucks's company-owned stores in the U.S. are
closed. The others have continued with drive-through and delivery
sales. Starbucks has said it won't open dine-in service at U.S.
cafes soon, relying on drive-through, delivery and pickup sales for
now. The chain plans to begin reopening closed stores with the
modified service on May 4, with around 90% of its 8,870
company-owned locations running by early June. Starbucks has said
it would continue to pay workers an extra $3 an hour through the
end of May.
Starbucks said that checks at stores in the U.S. are growing as
customers place group orders in drive-throughs.
"When you've had to be sheltering in place for several weeks,
just to get out for a nice uplifting experience at Starbucks, it's
familiar and it's rewarding," Chief Executive Kevin Johnson
said.
The company's China business has felt the virus's impact since
January, with same-store sales declining 90% at the peak of the
outbreak there, in mid-February. Nearly 100% of its stores in China
are now running with limited hours and modified service. Starbucks
said Tuesday that it will open a net-500 stores in China this
fiscal year, and defer 100 openings originally planned.
The same-store sales decline put an end to 41 consecutive
quarters of global growth for Starbucks. Starbucks's sales in
stores open for at least 13 months last declined in 2009 during the
recession.
The company reported earnings per share of 28 cents on $328
million in profit. Global sales for the second quarter ending in
March came to $6 billion, down 5% from the previous year. Analysts
had expected $5.9 billion in sales and an 8.5% drop in same-store
sales.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
April 29, 2020 02:47 ET (06:47 GMT)
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