Starbucks warns profits to cool

Starbucks says its profits won’t be as big as it thought because of a change to its share buyback program and effective tax rate.

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The coffee giant on Wednesday said it sees earnings-per-share growth “meaningfully below” its growth model of at least 10 percent because it is pulling forward share repurchases due to its appreciating stock price. Shares slumped following the announcement.

"We elected to pull forward about $2 billion worth of share repurchases that we had originally planned for fiscal 2020 into fiscal 2019," CFO Patrick Grismer said at the Goldman Sachs Global Retailer Conference. He said the decision was made due to the run-up in Starbucks’ share price, which has gained 50 percent so far this year.

"And with that pull forward then, there will be lower aggregate share repurchases in fiscal 2020 and the associated EPS benefit net of interest expense on the debt issues - issuances this year as well as what we expect to issue next year will be tempered relative to our original expectations," Grismer added.

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At the conference, Grismer also said Starbucks would see a higher effective tax rate in fiscal year 2020 after benefitting from a one-time benefit the prior year.

"I want to reinforce that our growth-at-scale agenda is delivering against our expectations," he said. "I would say that we’re firing on all cylinders from an operating performance perspective with the focus and discipline necessary to drive growth at scale for a company like Starbucks and our long-term double-digit EPS growth model is fully intact.”

Starbucks reiterated its fiscal 2019 guidance of between $2.80 and $2.82 a share.