Tuesday 27 September 2016

Starbucks is attracting fewer customers

Published 22/07/2016 | 07:34

The coffee chain now has more than 50 outlets in the Greater Dublin area alone, and has expanded beyond the city
The coffee chain now has more than 50 outlets in the Greater Dublin area alone, and has expanded beyond the city

Starbucks reported quarterly cafe sales growth that fell short of expectations in all major markets as customers made fewer visits, sending its shares down almost 3pc on Thursday.

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Results from the United States, which contributes the lion's share of sales and profits, missed targets due to the delayed start of a popular Frappuccino Happy Hour promotion and weaker demand that executives attributed to a contentious US presidential election campaign, terrorist attacks and civil unrest.

The world's largest coffee chain reported that global sales at cafes open at least 13 months rose 4pc in the fiscal third quarter ended June 26, well short of the 5.6pc gain analysts had expected, according to research firm Consensus Metrix.

The US-dominated Americas region posted 4pc growth, short of analysts' call for a 6.1pc gain, after rising 7pc in the second quarter and 9pc in the first quarter.

Customer transactions in the Americas were flat for the quarter, when Starbucks also changed its rewards program to remove the incentive to split orders to accumulate points faster.

Chief executive Howard Schultz called the US cafe results "an anomaly," and said Starbucks was confident that it could again achieve quarterly same-restaurant sales growth of 5pc or more.

Earlier on Thursday, Starbucks rival Dunkin' Brands reported soft US traffic for the latest quarter. Nigel Travis, chief executive of the company that owns the Dunkin' Donuts and Baskin-Robbins brands, said the industry had been struck by a "mini-malaise."

Financial reports from Chipotle Mexican Grill and Del Frisco's Restaurant on Thursday were also disappointing.

"That's a pretty good sign that consumer spending trends aren't great right now," Stephens restaurant analyst Will Slabaugh said in a telephone interview.

Starbucks, which is investing in mobile ordering and payments to serve customers faster, has been under fire from employees who say a recent move to cut labor hours has hurt take-home pay, morale and customer service.

Starbucks, which recently raised prices on some drinks, committed to increasing base pay for about 150,000 U.S. baristas and managers starting October 3.

Net income rose 20pc to $754.1m, or 51c per share. Revenue was up 7pc to $5.24bn.

Analysts had expected earnings of 49c per share on revenue of $5.33bn, according to Thomson Reuters I/B/E/S.

Starbucks shares fell 2.9pc to $55.95 in extended trading.

Reuters

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