As businesses from convenience store to fast casual restaurant up their coffee game, Starbucks seems to be feeling the squeeze. Expanding its holiday offerings beyond coffee didn't help much, either.
— Kristen Hawley
Starbucks Corp.’s U.S. slowdown has gone global.
The coffee chain posted disappointing sales growth in all its major regions on Thursday, signaling that it now has bigger problems than an overly saturated U.S. market. The results from the quarter ending on Dec. 31 sent shares down as much as 4.9 percent in late trading in New York.
“Our holiday merchandise and limited-time offers did not perform up to expectations,” Chief Executive Officer Kevin Johnson said in an interview. In the U.S., the chain also saw “a little bit of softness in the afternoon, which may be a reflection of fewer people out shopping.”
While Starbucks expanded its holiday gift items this year to include tech gadgets and small games, sales of those products were weak, he said.
Starbucks also may be seeing more competition from fast-food chains that are heavily pushing value menus — McDonald’s Corp. recently began advertising cappuccino, mocha and macchiato coffees for just $2. And the java giant has fewer wide open spaces to expand into, now that coffee culture — and other chains — have spread to most of the world.
Starbucks global same-store sales rose 2 percent last quarter, missing the 3 percent average of analysts’ estimates, according to Consensus Metrix. Comparable-store sales also trailed projections in the company’s Americas region, which includes the U.S. And they actually declined in Europe, the Middle East and Africa.
“We are laser-focused on accelerating growth in China and driving improvement across the U.S. business as we move into and through the back half of the year, ” Chief Financial Officer Scott Maw said.
Keeping a lid on expenses helped Starbucks post slightly better earnings than expected. Excluding tax benefits and other items, profit was 58 cents a share, compared with the 57-cent estimate.
China remained a bright spot for the chain: Same-store sales there rose 6 percent.
“The two growth engines of China and the U.S. are showing the results,” Johnson said. “China really is leading the way.”
©2018 Bloomberg L.P.