Starbucks promotional efforts, which it has been increasing recently, failed to resonate with customers, resulting in the company reporting lackluster store traffic in the U.S. for two quarters in a row.
Reuters, citing the company’s second-quarter financial results, reported that same-store sales in the Americas — which is led by the U.S. — increased 2 percent in the second quarter. Traffic was flat in its stores. Reuters noted that during the second quarter, Starbucks ran promotions in the U.S. in which customers got 15 percent off blonde espresso drinks and half-priced espresso drinks during its Happy Hour in the afternoons. For the second quarter, Starbucks reported net income of $660 million or $0.47 a share, which is up from $653 million or $0.45 a share from the year-earlier second quarter. Excluding items, it reported EPS of $0.53 a share, in line with Wall Street expectations. Revenue increased close to 14 percent to $6 billion, Reuters reported.
At the same time that traffic is flat in the U.S., it is seeing growth in China, with same stores up 4 percent during the second quarter. It is slower than the past two quarters where it had same-store sales that were up 6 percent and 8 percent, respectively. The company blamed the slower traffic on the timing of the Lunar New Year, noting business in the country remains strong. In Europe, the Middle East and Africa, Starbucks saw traffic decline 4 percent in the second quarter, while global traffic as a whole was down 1 percent. In conjunction with its earnings report, Starbucks announced that its board authorized a buyback program of 100 million shares, which Reuters noted has a value of more than $5 billion based on the current stock price of Starbucks.
The earnings report comes amid efforts on the part of the coffee chain operator to repair its reputation after the arrest of two black men in one of its stores in Philadelphia. A customer filmed the incident, in which the men were waiting for a friend to arrive, which went viral and resulted in calls to boycott Starbucks. Starbucks’ CEO has responded by meeting with the two men and gearing the company up to close 8,000 stores on May 29 to provide employees with racial tolerance training.