Starbucks Corp on Wednesday forecast a 47 percent slump in second-quarter earnings, scrapped its full-year forecast and warned that the financial hit from the COVID-19 pandemic would extend into the final quarter of this fiscal year.
The company also said it would temporarily suspend its share buyback program and take steps to cut costs, but would maintain its quarterly dividend.
Starbucks said it now expects to report second-quarter earnings of about US$0.28 per share, reflecting the impact of lost sales for the period as well as higher costs.
Photo: AFP
It had reported US$0.53 per share in the year-earlier period.
The world’s largest coffee chain said same-store sales in the US began to decline on March 12 and have steadily worsened.
The company also said revenue in China faced a shortfall of about US$400 million compared with its expectations, with a 50 percent decline in comparable store sales for the second quarter that ended last month.
Like most other restaurants, Starbucks had to close its cafe areas and move operations to drive-through, carry out and delivery only in response to customer concerns and government mandates to help stop the spread of the deadly virus by limiting social contact.
The company expects to report its second-quarter earnings on April 28.
Starbucks said that a sharp slowdown from the coronavirus pandemic would worsen before getting better, with the financial impact extending as far as September.
The company based its assessment on the tentative recovery in China, Starbucks’ most important market, along with the US.
The coffee chain went through social distancing and mandatory closures in the Asian nation earlier in the year, giving the company an early glimpse at how the situation would play out in the US and elsewhere.
US same-store sales growth was 8 percent in the quarter through March 11, the company said in a filing. That was the strongest pace in four years, but was derailed as the pandemic spread. By the end of the month, sales had settled into a decline of 60 to 70 percent.
Starbucks said it has US$2.5 billion in cash and US$3.5 billion in short-term borrowings, giving it enough liquidity to get through the tough times.
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