Starbucks Lowers Long-Term Target, Selling Tazo to Unilever--Update
03 November 2017 - 10:00AM
Dow Jones News
By Julie Jargon
Starbucks Corp. offered a muted outlook for future sales and
profit, setting what it says are more realistic targets in a tough
environment for restaurants and coffee shops.
Starbucks shares fell more than 5% in post-market trading after
the coffee giant missed sales expectations for its fiscal fourth
quarter and lowered its long-term profit growth target for the
first time in seven years.
"We have not consistently delivered against our long-term
financial targets," said Chief Executive Kevin Johnson. He added
that the company reset its long-term guidance to "represent
performance we can meet or beat in the years ahead."
Starbucks also said it would sell its Tazo brand of teas to
focus on its Teavana brand. Unilever PLC is paying $384 million for
the Tazo brand, which is sold primarily in grocery and convenience
stores.
The chain posted a 2% rise in same-store sales in its home
market in its fiscal fourth quarter and reset its long-term annual
earnings-per-share growth target to 12% or greater, down from its
previous forecast of 15% to 20%. The company said U.S. same-store
sales would have risen 3% in the quarter if not for closures and
lost business related to Hurricanes Harvey and Irma.
Starbucks also adjusted its long-term annual global same-store
sales growth target to 3% to 5%, compared with its previous target
of mid-single digit growth.
"The overall retail industry is continuing to go through a
significant disruption," Mr. Johnson said in an interview. He said
that because Starbucks is still seeing traffic growth while many
restaurants struggle to draw in customers, the chain is gaining
market share.
When the company reported fiscal third quarter results in July
executives warned of challenges ahead due to a weak retail
environment. On Thursday, the company posted earnings per share of
54 cents for the quarter, in line with analysts' expectations. But
its same-store sales came lower than expected and, in the U.S.,
fell far short of its historic 5% growth rate. Revenue also dipped
unexpectedly.
China was once again the bright spot for the company, generating
8% same-store sales growth. Globally, Starbucks posted 2% growth in
same-store sales, missing expectations.
The company reported revenue of $5.7 billion, down 0.2% from a
year ago. It reported a profit of $788.5 million, or 54 cents a
share, compared with $801 million, or 54 cents a share, in the
year-ago period.
Write to Julie Jargon at julie.jargon@wsj.com
(END) Dow Jones Newswires
November 02, 2017 18:45 ET (22:45 GMT)
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