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Starbucks says China getting back to normal after steep fall

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Starbucks Corp saw its business in China crater in recent months - but assured investors it's quickly getting back to normal.

[CHICAGO] Starbucks Corp saw its business in China crater in recent months - but assured investors it's quickly getting back to normal.

The coronavirus outbreak will curb profit this quarter by as much 18 US cents a share, the Seattle-based company said in a filing Thursday. The key measure of comparable sales in China, meanwhile, will fall about 50 per cent in the second quarter from a year earlier. Still, Starbucks said the impact will be temporary. The company's shares alternated between losses and gains in late trading.

"Although there are near-term financial implications, our long-term, optimistic outlook for the growth potential of Starbucks is undiminished," the company said, noting that it's too early to estimate the effect the viral disease will have on its full-year results.

Starbucks expects a coronavirus-related headwind of as much as US$430 million to China's revenue this quarter. Early signs of recovery are emerging as the coffee giant is seeing sequential improvements in weekly sales.

Starbucks, which identified China as its key areas of focus alongside the US, is opening a location in China about every 15 hours. To combat rising competition from local rivals such as Luckin Coffee Inc., Starbucks has been expanding delivery and increasing its advertising.

Some store openings planned for this financial year will likely be deferred to next year due to the virus outbreak disrupting construction activities, according to the company.

Starbucks closed about 80 per cent of its 4,300 China locations in early February for the Chinese New Year holiday and the rapid spread of the virus. Now, the vast majority of locations have opened again with enhanced safety protocols, the company said, adding that the store opening rate will reach about 95 per cent at the end of the quarter.

BLOOMBERG