CHICAGO – Starbucks Corp. has closed more than half of its mainland China locations because of a viral outbreak that has disrupted lives in the coffee chain’s most important growth market.
The news cast gloom over what otherwise would have been an upbeat earnings report. Same-store sales, an important gauge of success for restaurant chains, rose 5 percent in the fiscal first quarter that ended Dec. 29, outpacing the 4.6 percent average estimate compiled by Consensus Metrix.
The company maintained its 2020 forecast but said it doesn’t include the impact of temporarily closing so many stores because it can’t yet calculate it.
“We will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results,” Chief Executive Officer Kevin Johnson said in a statement. He also reaffirmed the company’s commitment to China.
Starbucks shares reversed an initial gain in late trading, falling as much 1 percent to $87.70 as of 4:29 p.m in New York. The stock has been mostly flat in 2020 after jumping almost 37 percent last year.
China and the U.S. are the most important markets for Starbucks as it seeks to recapture its rapid growth of past years. The results show the strategy is paying off — with higher customer traffic in the two nations particularly encouraging.
The coronavirus, of course, will be the wild card in whether Starbucks can maintain its pace. The company is expanding aggressively there, with global store growth of 6 percent in the quarter led by China, where the chain has more than 4,000 locations. Starbucks said it couldn’t “reasonably” estimate the impact of the coronavirus, but expects the outbreak to “materially affect” fiscal second-quarter and full-year results.
Operating margin expanded in the quarter to 17.2 percent, compared with 15.3 percent a year ago. While higher sales and supply-chain savings helped, the company is still facing higher wage and employee benefits costs.
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