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Starbucks results disappoint, new CEO must brew up growth

Friday, April 28, 2017 - 08:05

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Kevin Johnson, who succeeded Howard Schultz as CEO this month, presided over an earnings call where the company cut its full-year profit target on the heels of disappointing second-quarter sales and stalling growth from its main business in the United States.

[LOS ANGELES] Starbucks Corp's new chief executive has a tall order to fill in keeping the world's biggest coffee chain's promise to return to historic growth rates amidst stubborn US restaurant and retail slumps.

Kevin Johnson, who succeeded Howard Schultz as CEO this month, on Thursday presided over an earnings call where the company cut its full-year profit target on the heels of disappointing second-quarter sales and stalling growth from its main business in the United States.

Shares in the company fell 4.9 per cent to US$58.30 after Starbucks also announced that it was reviewing its Teavana business after that chain's mall stores dragged down overall sales.

Mr Johnson nevertheless remained upbeat.

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"With our US business accelerating throughout the quarter and strong performance in China, we are poised to deliver strong revenue growth in the second half and into the future," Mr Johnson said in a statement.

Still, Starbucks lowered its full-year net earnings target to a range of US$2.06 to US$2.10 per share from US$2.09 to US$2.11 per share.

It also said full-year revenue growth would be at the lower end of its previously forecast range of 8 to 10 per cent.

Starbucks net revenue was up 6 per cent to US$5.3 billion for the fiscal second quarter, but fell just short of the US$5.4 billion expected by analysts polled by Thomson Reuters I/B/E/S.

Global sales at established restaurants were up 3 per cent for the quarter ended April 2, below the company's 5 per cent growth target.

Sales at US cafes open at least 13 months were up 3 per cent in the latest quarter, unchanged from the prior quarter. US traffic, referred to as transactions, fell 2 per cent for the second quarter in a row and the average amount spent per order was up 4 per cent, versus the 5 per cent gain in the prior quarter.

Net income rose 13.5 per cent to US$652.8 million, or 45 cents per share, matching analysts' target.

Starbucks in January reported disappointing results from US cafes and pinned most of the blame on mobile orders that had piled up at drink pickup stations.

The company has since sought to ease congestion by reworking some job duties and giving managers more leeway to add needed labour as part of a broad customer re-engagement program called North Star.

REUTERS

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