Starbucks Posts Its Worst Loss in Years -- WSJ
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 (July 29, 2020).
The coronavirus is still weighing on Starbucks Corp., but the
coffee giant expects to narrow its losses as the pandemic marches
The coffee giant on Tuesday reported its steepest
earnings-per-share losses in more than a decade as a result of
lower sales and higher costs stemming from the pandemic. Global
same-store sales plunged by 40% in the quarter ending in June, and
the Seattle-based chain reported an operating-income loss of $704
But that was better than many analysts expected given the
severity of the blow the pandemic has dealt to Starbucks, first in
China, then across Asia, Europe and the U.S. The chain said it
expects the worst effects of the virus to moderate in its current
quarter and believes same-store sales will recover in the U.S. and
China by its next fiscal year.
The chain hopes to have opened hundreds of stores by the end of
its fiscal year. Same-store sales are improving as the crisis
continues, executives said.
Shares of Starbucks rose 6% to $79 in after-hours trading.
Big chains have generally performed better than independent
restaurants during the pandemic due to their drive-throughs and
established takeout operations. But chains have also notched big
sales hits. McDonald's Corp. on Tuesday said its same-store sales
fell 24% globally in its most recent quarter, and it expects the
virus and resulting economic downtown to depress consumer spending
for some time.
Starbucks was early among chains to close stores as a result of
the coronavirus and to pay employees bonuses or allow them to stay
home if they weren't comfortable working during the pandemic. It
said it lost $3.1 billion in sales during the third quarter due to
store closures, limited hours and fewer customer visits.
Starbucks said 96% of its company-owned U.S. stores are now open
with at least to-go and limited dine-in service. The company has
beefed up delivery and pickup services that it intends to keep. It
also is building more to-go-only stores in the U.S.
Executives said more customers have shifted purchases to
suburban locations from urban ones as traffic remains light in
commercial corridors. Average orders are also up 25% as more
customers get drinks and food for their families during the
pandemic. Packaged coffee sales are also up for Starbucks as
workers remain at home.
"I believe this is one of those rare opportunities to move
aggressively and further differentiate Starbucks from our
competition," Chief Executive Kevin Johnson told investors.
The coffee chain said it expects global same-store sales
declines of 12% to 17% for its fourth-quarter and full year and for
revenue to decline by 10% to 15% compared with the previous
quarter. Starbucks said it expects earnings of 6 cents to 21 cents
a share for its fourth quarter.
For the third quarter, spending on worker pay, benefits and
protective equipment hurt margins. Starbucks said it spent $350
million during the quarter on virus-related benefits and pay for
workers, royalty deferments for international licensees and
payments to suppliers needing a cash infusion.
The company said it had $4.2 billion in sales in the quarter,
down 38% from the prior year's period but better than expectations
of analysts' polled by FactSet.
Write to Heather Haddon at firstname.lastname@example.org
(END) Dow Jones Newswires
July 29, 2020 02:47 ET (06:47 GMT)
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