Starbucks Revenue Misses, Selling Tazo Tea

Starbucks revenue missed expectations of analysts when posted Thursday which sent shares down over 3%. The miss on revenue shows the café chain based in Seattle continues attempting to regain footing amidst a restaurant and retailing landscape that has become challenging across the U.S.

Starbucks adjusted earnings per share were 55 cents which were in line with analysts’ expectations. However, revenue was $5.7 billion while analysts were expecting $5.8 billion. Sales at same stores increased 2% while a growth of 3.3% was expected.

The café chain’s locations have been hit with less foot traffic at malls and the changing habits of consumers related to dining, as more are now dining at home. During the most recent quarter, Starbucks sales were hurt by a number of hurricanes that hit the U.S. and stores had to be closed.

Starbucks global same store sales were up 2% following a gain of 2% in the amount each customer was spending and an increase of 1% in transactions.

Excluding impact from two hurricanes, which hit the U.S. during September, global same-café sales increased 3%.

In the U.S., the largest market for Starbucks, its comparable sales increased by 3%, excluding the impact of two hurricanes. Across the Americas, comparable sales increased 3%, compared to a projected increase of 3.3%.

Because of its performance being disappointing, Starbucks will revise its projections for the long term and now is expecting long-term growth in annual earnings per share of a minimum of 12%, which is down from between 15% and 20%.

Over the long-term, the café chain is targeting global comparable sales annual growth of between 3% and 5% and annual growth in consolidated net revenue of the high-single digits.

Net income for the quarter reached $788.5 million equal to 54 cents per share, in comparison to $801 million equal to 54 cents per share for the same period one year ago. On the basis of non-GAPP, Starbucks earnings per share were 55 cents, which was in line with estimates from Wall Street.

To counter weakness in sales in the U.S., the café chain has invested in its online business, is growing its reward programs and focusing on drinks that are trending such as beverages that are plant-based. Consumers are switching increasingly more to almond milk and soy in coffee as well as in other drinks.

Starbucks will also work to streamline its business that is non-coffee and announced Thursday its plans to sell its Tazo tea brand to European based Unilever for a price of $384 million.

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