Starbucks Slumps After Missing Wall Street Expectations

While there was no shortage of victory marches out of yesterday’s earnings, the team at Starbucks might be spiking its coffee with something a little stronger than espresso this morning. Its share price is down 4 percent as trading opens this morning, depressed by an earnings performance that failed to meet investor and analyst expectations.

Starbucks has now logged two quarters in a row in which same store sales failed to meet predictions — though notably, they did not decline. Same store sales were up 3 percent — but analysts were looking for 3.7 percent.

Earnings per share were 45 cents on, which was about what the street wanted to see.  Revenue, however, was not, clocking in at $5.29 billion, as opposed to the expected $5.41 billion Wall Street was expecting.

CEO Kevin Johnson remained optimistic about the rest of the year — despite earnings weakness.

“With our U.S. business accelerating throughout the quarter and a strong performance in China, we are poised to deliver strong revenue growth in the second half and into the future,” said Johnson said in a press release.

The company also noted that same store sales has seen recent growth, culminating with a 4 percent U.S. growth rate in March — with greater traction seen in April. Gotta love the allure of the Unicorn Frappuccino — it may be undrinkable, but it looks nice on Instagram and created something of a feeding frenzy during its limited release.

Starbucks plans to release a number of new products in the near term — which, according to the firm’s CFO Scott Maw, “gives us great confidence in our ability to deliver strong comp sales and revenue growth in the back half of fiscal 2017.”

Starbucks will also open two more of its “Roastery locations” in 2018 and another in 2019. Roasteries are designed to be much larger than a traditional Starbucks cafe and allow the company to do small-batch roastings of “rare and exotic” Reserve coffees (for a rare and exotic Reserve coffee price of around $12 a cup). Currently the chain hopes to open 20 to 30 of these worldwide.


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