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Starbucks notes impact of coronavirus on China profits as it beats Wall Street fiscal 1Q estimates

It has been forced to shut more than half of its over 4,000 stores in China following the outbreak of the deadly virus

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Starbucks has postponed the updating of its fiscal 2020 guidance until an estimate is reached on the impact of the coronavirus

Shares of Starbucks Corp (NASDAQ:SBUX) held steady in pre-market trade on Wednesday, a day after the popular coffee chain revealed it has been forced to shut thousands of stores across China in the wake of the coronavirus outbreak, which is set to sharply impact its revenues in the country. 

Before the opening bell, investors balanced the good news that the coffee retailer’s earnings in its fiscal first-quarter exceeded the estimates of Wall Street analysts, with CEO Kevin Johnson’s pessimism about the business disruption that the world’s biggest coffee chain is seeing in China, its biggest growth market with 4,292 stores, due to the deadly virus, which was first detected in the city of Wuhan. 

In response, Starbucks shares were flat at $88.47 prior to the market open. 

READ: British Airways suspends flights to and from China as coronavirus death toll rises

“Currently, we have closed more than half of our stores in China and continue to monitor and modify the operating hours of all of our stores in the market in response to the outbreak of the coronavirus. This is expected to be temporary,” Starbucks said.

On a positive note, Starbucks said its net income came to $886 million, or $0.74 per share, in the fiscal first quarter, which represents a significant increase from the $761 million, or $0.61 per share, it earned in the year-ago quarter. Stripping out the impact of one-time items, Starbucks earned $0.79 per share, surpassing the estimate of $0.76 per share.

Revenue, meanwhile, jumped to $7.1 billion from $6.6 billion in the year-ago quarter, while same-store sales around the globe climbed 5% over the same period.

“Building on solid business momentum from fiscal 2019, Starbucks performed very well throughout the first quarter, including one of the strongest holiday seasons in the history of our company,” said Johnson. “As a result, we are off to a strong start in fiscal 2020.”

Johnson noted that Starbucks plans to be “transparent” with its stakeholders about the “extraordinary circumstances” unfolding in China and he remains bullish on the company’s trajectory there.

Starbucks has postponed the updating of its fiscal 2020 guidance until an estimate is reached on the impact of the coronavirus.

“We remain optimistic and committed to the long-term opportunity in China, building on our brand heritage and 20-year legacy of profitable growth,” Johnson said.

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NASDAQ:SBUX
Market: NASDAQ
Market Cap: $116.09 billion
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