Starbucks, the coffee chain operator, said Tuesday (June 20) that it was scaling back its growth and cutting its sales targets for the third quarter. This comes as its loyalty program and mobile app are driving business, with 39 percent of its sales in the U.S. coming from those venues.
According to a report in CNBC, Starbucks said it would slow down the pace of licensed store openings and will shutter underperforming ones that are in highly populated areas. While Starbucks typically shuts around 50 stores a year, in 2019 it expects that pace to increase to around 150 stores. “We know that we drive more shareholder value in a company-owned store … than a licensed store,” CEO Kevin Johnson said during a presentation at the Oppenheimer Annual Consumer Conference that was covered by CNBC.
In addition to the store closings, Starbucks plans on returning around $25 billion to shareholders via stock buybacks and dividends, with the latter increasing by 20 percent. The program lasts through 2020 and marks a $10 billion increase from what it said back in November. As for same-store sales growth in the third quarter, the company is forecasting it to be up 1 percent, reported CNBC. “We must move faster to address the more rapidly changing preferences and needs of our customers,” Johnson said in a statement to CNBC. “Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers, which serve as the foundation to re-accelerate growth and create long-term shareholder value.” The comments coming out of the conference on Tuesday (June 20) drove the stock lower.
For some time Starbucks has been rolling out initiatives aimed at boosting sales at underperforming stores, such as providing more of a selection of cold drinks and new lunch items. According to CNBC, 50 percent of its business now comes from cold beverages — which is why the focus on those products, which includes the Teavana brand of iced teas. That has increased to 12 percent of Starbucks’ sales, up from 11 percent in 2015. Since the start of the year, sales of iced teas is up 14 percent year-over-year, noted the report.