Starbucks Lowers Long-Term Target, Selling Tazo to Unilever--Update

By Julie Jargon 

Starbucks Corp. offered a muted outlook for future sales and profit, setting what it says are more realistic targets in a tough environment for restaurants and coffee shops.

Starbucks shares fell more than 5% in post-market trading after the coffee giant missed sales expectations for its fiscal fourth quarter and lowered its long-term profit growth target for the first time in seven years.

"We have not consistently delivered against our long-term financial targets," said Chief Executive Kevin Johnson. He added that the company reset its long-term guidance to "represent performance we can meet or beat in the years ahead."

Starbucks also said it would sell its Tazo brand of teas to focus on its Teavana brand. Unilever PLC is paying $384 million for the Tazo brand, which is sold primarily in grocery and convenience stores.

The chain posted a 2% rise in same-store sales in its home market in its fiscal fourth quarter and reset its long-term annual earnings-per-share growth target to 12% or greater, down from its previous forecast of 15% to 20%. The company said U.S. same-store sales would have risen 3% in the quarter if not for closures and lost business related to Hurricanes Harvey and Irma.

Starbucks also adjusted its long-term annual global same-store sales growth target to 3% to 5%, compared with its previous target of mid-single digit growth.

"The overall retail industry is continuing to go through a significant disruption," Mr. Johnson said in an interview. He said that because Starbucks is still seeing traffic growth while many restaurants struggle to draw in customers, the chain is gaining market share.

When the company reported fiscal third quarter results in July executives warned of challenges ahead due to a weak retail environment. On Thursday, the company posted earnings per share of 54 cents for the quarter, in line with analysts' expectations. But its same-store sales came lower than expected and, in the U.S., fell far short of its historic 5% growth rate. Revenue also dipped unexpectedly.

China was once again the bright spot for the company, generating 8% same-store sales growth. Globally, Starbucks posted 2% growth in same-store sales, missing expectations.

The company reported revenue of $5.7 billion, down 0.2% from a year ago. It reported a profit of $788.5 million, or 54 cents a share, compared with $801 million, or 54 cents a share, in the year-ago period.

Write to Julie Jargon at [e-mail]

(END) Dow Jones Newswires

November 02, 2017 18:45 ET (22:45 GMT)

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