Starbucks Adjusts Sales Targets After Third Straight Miss

By Maria Armental 

Starbucks Corp. on Thursday revised its projections for the year as sales in the June quarter again fell short of expectations, dragged down by its European operations.

Shares, down 4% this year, fell 3% to $55.80 in after-hours trading.

The Seattle-based coffeehouse chain, which has missed analysts' sales targets for three consecutive quarters, now expects sales to increase about 10%, with sales at stores open at least 13 months increasing in the mid-single digits. That's a downward revision from its previous guidance of revenue increasing by at least 10% with comparable sales increasing "somewhat above the mid-single digits."

Meanwhile, the company raised its profit forecast, saying it now expects to make $1.88 to $1.89 a share, up from $1.85 to $1.86 a share.

Domestic sales, which account for the bulk of business, drove an overall revenue increase, easing concerns that customers would spurn changes to the company's loyalty program that went into effect in April.

Sales rose 8% in the U.S. while comparable sales, a closely watched metric, rose 4% in the third quarter. The results, however, suggest a slowdown from the year-ago period when Starbucks reported increases of 13% and 8%, respectively.

Company officials have defended the changes, which link rewards to spending rather than just number of visits, by saying they would improve service by eliminating the incentive to split orders.

On Thursday, executives said that, at the end of the quarter, the program had expanded to 12.3 million active members in the U.S., an 18% increase from the year earlier.

Meanwhile, comparable sales in Europe, Middle East and Africa fell 1%, against analysts' projected 2.8% increase, while China and the Asia Pacific region saw a weaker-than-projected 3% increase.

China, a key pillar in its international expansion with a target of more than 3,400 stores by 2019, saw a 7% increase in comparable sales.

Over all, Starbucks reported profit of $754 million, or 51 cents a share, compared with $626.7 million, or 41 cents a share, a year earlier. Excluding certain items, profit was 49 cents, compared with 42 cents a year earlier and at the high-end of the company's guidance.

Revenue rose 7% to $5.24 billion, below analysts' projected $5.33 billion, according to Thomson Reuters.

Write to Maria Armental at [e-mail]

(END) Dow Jones Newswires

July 21, 2016 16:53 ET (20:53 GMT)

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