Starbucks Chief Vows to Learn From Philadelphia Arrests -- Update

By Julie Jargon and Aisha Al-Muslim 

Starbucks Corp.'s chief executive promised to prevent an incident like the arrest of two black men at one of its coffee shops in Philadelphia this month from reoccurring.

"I am personally committed to acting on several fronts to make sure it never happens again," Chief Executive Kevin Johnson told investors on Thursday as Starbucks reported higher-than-expected sales but flat traffic to U.S. stores in its fiscal second quarter.

Shares fell 1.8% to $58.30 in post-market trading. "We need to move transactions in the right direction," Chief Operating Officer Rosalind Brewer said in an interview. She added that Starbucks wants to attract more customers in the afternoon, when business is slow. The company is planning new advertisements to encourage afternoon visits.

Starbucks reiterated its outlook for comparable-store sales growth of between 3% and 5% globally this fiscal year but noted that excludes the impact of closing 8,000 company-owned shops next month for a day of antibias training in the wake of the Philadelphia incident. "We're not seeing an impact on comparable sales as a result of Philadelphia," Mr. Johnson said.

A Starbucks manager called police after the two men asked to use the restroom without purchasing anything and allegedly refused to leave. A video of their arrests in the store went viral and Starbucks executives traveled to Philadelphia to meet with them and community leaders.

Mr. Johnson said closing stores next month for antibias training is just one step in a new effort to treat customers with more sensitivity.

"All companies make mistakes," Mr. Johnson said. "Great companies learn from them and improve and that's exactly what we hope to do."

Starbucks generated sales from less frequent customers after extending mobile ordering to non-loyalty club members in March, Ms. Brewer said. Mobile orders made up 12% of U.S. company-operated transactions in the quarter, the company said.

The Seattle-based company posted a 2% increase in same-store sales globally in the second quarter, ahead of the 1.8% increase analysts had expected. Same-store sales grew 4% in China, the company's fastest-growing market.

Excluding one-time items, Starbucks earned 53 cents a share. Revenue jumped 14% to $6.03 billion, beating estimates of $5.93 billion. Starbucks reported a second-quarter profit of $660.1 million, or 47 cents a share, up from $652.8 million, or 45 cents a share, in the year-ago period.

Write to Julie Jargon at [e-mail] and Aisha Al-Muslim at [e-mail]

(END) Dow Jones Newswires

April 26, 2018 19:04 ET (23:04 GMT)

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