logo-loader

Starbucks loses steam after cutting long-term growth target and disappointing fourth quarter numbers

Last updated: 08:52 03 Nov 2017 EDT, First published: 04:52 03 Nov 2017 EDT

Starbucks
Starbucks cut its forecast for long-term profit growth, now guiding earnings per share growth at 12% or greater in the years to come. It had previously targeted 15% to 20% growth.

Starbucks Corp (NASDAQ:SBUX) shares lost their steam in premarket trade after the company cut its profit forecast following disappointing fourth quarter sales.

In addition, the coffee shop chain announced plans to sell its Tazo brand of teas to Unilever plc for US$384mln in its latest move to shift its focus back to its core operations.

READ: Starbucks is competing against itself in US with saturation of cafes, analyst warns

Starbucks closed the last of its Teavana tea shops a few months ago. Unilever is buying the brand, which is sold mainly in grocery and convenience stores. The deal is expected to be completed later in the year.

Starbucks bought the brand for US$8.1mln in 1991.

In a statement on Thursday, Starbucks cut its forecast for long-term profit growth, now guiding earnings per share growth at 12% or greater in the years to come. It had previously targeted 15% to 20% growth.

In the quarter, revenue came in at US$5.7bn, down 0.2% from a year ago. Profits stood at US$788.5mln, or 54 US cents a share, compared with US$801mln, or 54 US cents a share, a year ago.

On an adjusted basis, earnings per share came in at 55 cents.

READ: Starbucks set to hire hire 2,500 refugees for European stores by 2022

Revenue was below what the market had expected at US$5.8bn, with adjusted earnings per share of 55 US cents..

In the quarter, the company recorded comparable-store sales growth of 2% globally, boosted by rises in the average order price and the number of transactions.

However, US same-store sales grew by 2%, far below the company's benchmark of 5% growth.

Hurricanes Harvey and Irma also ate into sales growth, shaving 1 percentage point off both global and US growth.

Despite this, membership in its rewards programme grew by 11% to 13.3 million in the US while mobile orders reached  rose to 10% of transactions in US company-operated stores.

In China, it was another success story, where same-store sales rose by 8%, driven by a 7% hike in transactions.

In premarket trade, its shares were down 0.24% at US$54.30.

 

BenevolentAI advances novel ulcerative colitis treatment through Phase 1a trial

BenevolentAI (OTC:BAIVF) chief scientific officer Dr Anne Phelan joins Proactive's Stephen Gunnion with positive safety data from the Phase 1a, first-in-human, clinical study of BEN-8744 in healthy volunteers. Phelan explained that BEN-8744 is a potent, selective PD10 inhibitor, uniquely...

19 minutes ago