Starbucks Corp on Tuesday became the first major US company to warn of a financial hit from the novel coronavirus outbreak in China, as it closed thousands of restaurants and adjusted operating hours in its biggest growth market.
The world’s largest coffee chain delayed a planned update — based on strong quarterly earnings results — to its financial forecast for this year because of the outbreak, which has caused more than 100 deaths and more than 4,000 confirmed cases in China.
Shares of the company, which operates 4,292 stores in China, fell 1 percent in extended trading.
Photo: AFP
The company, which beat sales estimates during its first quarter, “intended to raise certain aspects of our full-year financial outlook for fiscal 2020,” chief executive officer Kevin Johnson said during the earnings telephone call.
However, because of the coronavirus outbreak, it decided not to revise guidance on Tuesday.
The company expects the financial impact to be material, but temporary, and it will depend on the number of stores it has to close and for how long. Currently about half of its stores are shuttered in China, which makes up about 10 percent of global revenue.
It will not know until March at the earliest what the financial impact will be, but its long-term double-digit growth expectations are intact, executives said.
Starbucks’ China rival, Luckin Coffee Inc (瑞幸咖啡), has said it would keep stores closed in Wuhan throughout the Lunar New Year holidays.
Starbucks is responding to the virus “in a thoughtful and responsible way to protect our partners, and support health officials and the government as they work to contain this public health risk,” Johnson said. “I am proud of how Starbucks China is navigating a very dynamic situation.”
The Seattle-based company beat first-quarter estimates for same-restaurant sales, growing 5 percent compared with expectations for a 4.4 percent increase, according to IBES data from Refinitiv.
Sales at restaurants open for at least 13 months rose 3 percent in China, where it is to continue to concentrate on personalized beverages and its digital push rather than adopt a strategy of offering cheaper drinks like its rivals have used to gain market share, Johnson said.
Total net revenue rose 7 percent to US$7.1 billion, largely in line with analysts’ average estimate of US$7.11 billion. Net earnings attributable to the company rose to US$885.7 million, or US$0.74 per share, from US$760.6 million, or US$0.61 per share, a year earlier.
Excluding one-time items, the company earned US$0.79 per share, above estimates of US$0.76.
Revenues grew 9 percent in the quarter in the US, where it added 1.4 million customers to its 90-day active Starbucks Rewards membership, ending the quarter with 18.9 million active members, a 16 percent increase over prior year.
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