Starbucks Misses Growth Expectations in U.S. Stores

By Julie Jargon Features Dow Jones Newswires

Starbucks Corp. still hasn't made good on its pledge to return its critical U.S. business to 5% same-store sales growth.

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The coffee giant missed sales expectations again in its home market and globally, with sales up 3% overall and in the U.S. in its second quarter. Analysts were expecting 3.7% growth globally and 3.5% in the Americas, of which the U.S. is by far the largest market.

Shares fell 3.6% to $59.09 in after-hours trading.

The company said its earnings report will no longer contain forward-looking targets but that it will provide further details on its business outlook during the call with investors.

The coffee giant said same-stores rose 3% globally in its fiscal second quarter, with a 3% rise in both the U.S. and the overall Americas segment. Analysts surveyed by FactSet were expecting a 3.7% rise in global same-store sales and 3.5% growth in the Americas segment, of which the U.S. is the largest market. Growth in Starbucks's critical U.S. market has slowed in recent quarters and executives have pledged to return the U.S. back to its historic growth rate of 5% or more, but haven't specified when that will happen.

The U.S. same-store sales increase was driven by a 4% increase in average check; transactions declined by 2%. Adjusting for the estimated impact of order consolidation related to its new loyalty program, average check grew 3% and transactions were flat.

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Starbucks in recent quarters has blamed its sales slowdown on political and economic uncertainty as well as a bottleneck caused by customer crowding related to mobile orders. Chief Executive Kevin Johnson, who took over from Howard Schultz earlier this month, has said the company is addressing the mobile order issues and that he is focused on deriving more sales at lunch with new food offerings.

The company said sales in the U.S. improved as the quarter progressed and that it has seen further acceleration in April. Increased capacity and the "food and technology innovation we will be introducing in the months ahead gives us great confidence in our ability to deliver strong comparable sales and revenue growth in the back half of fiscal 2017," Chief Financial Officer Scott Maw said in the press release.

Starbucks earned $653 million, or 45 cents a share, up from $575 million, or 39 cents, the year before.

Revenue rose 6% to $5.3 billion. Analysts surveyed by FactSet had forecast earnings of 45 cents a share on $5.4 billion in sales.

Same-store sales in Europe, the Middle East and Africa declined 1% from a year ago. The China and Asia Pacific region posted a 3% increase in same-store sales, with China same-store sales up 7%.

Write to Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

April 27, 2017 16:59 ET (20:59 GMT)