Starbucks reported 40% drop in global sales

News

Starbucks reported 40% drop in global sales

05.08.2020 News

Shares of Starbucks have lost more than 15% since the beginning of the year, rose 5.7% after the publication of the results of the 3rd quarter, which ended on June 28, and forecasts for the 4th quarter and the whole of 2020.

For Starbucks, as for the entire global restaurant market, the three months from April to June 2020 were a trial. Initially, restaurants in China, then in the United States and around the world were closed due to quarantine during the COVID-19 pandemic, the number of visitors was limited and was much lower, as many were transferred to remote work, study or lost their jobs. According to Starbucks management, the pandemic resulted in a loss of $ 3.1 billion.

For the 3rd quarter, the company reported a loss per share of $ 0.46, which is a sharp decrease compared to previous quarters, but better than analysts estimate a loss of $ 0.59 per share.

The global network of coffee shops posted a net loss of $ 678.4 million compared to a profit of $ 1.37 billion a year earlier. Profits were affected by increased costs of paid leave for staff and security measures dictated by quarantine rules.

Total revenue decreased from 38% to $ 4.2 billion, but was higher than analysts’ estimates of $ 4.06 billion.

Global sales of comparable stores (open for at least a year) fell by 40%, falling in North and South America was 41%, but it was less than analysts forecast a decrease of 42.05% and 42.82%, respectively.

The number of active participants in the reward program also decreased by 5% compared to last year, because regular customers ordered coffee very rarely. However, the situation needs to improve as the network recently introduced new cost-effective payment methods to participants.

The growth was positive for the services of delivery and mobile replacement, as 22% of the foreign transactions in the quarter were sold.

Despite the epidemic, Starbucks during the quarter have been opened 130 new festooned cafes all over the world. The company also voiced, that there are more points with the service of a car “pickup”, for the analogue of McDrive in McDonalds.

The Starbucks Company is optimistic about future, considering that July trends show a good rate of recovery in sales in the United States.

The company raised the profit forecast for the fourth fiscal quarter, believing that “the impact of the pandemic in the current quarter will be significantly mitigated.” Earnings per share for the fourth quarter changed from $ 0.15 $ 0.40 to $ 0.18 $ 0.33, against $ 0.27, according to analysts.

Starbucks also changed an annual global sales forecast from a 10% -20% decline to a 12% -17%.

Executives expect sales in comparable stores in China and the United States to grow significantly by the end of the first and second financial quarters, about a year after the crisis, unless there is a new wave of sickness or a serious economic crisis. Starbucks expects to make a profit in the next two quarters.

“We still have a long way to go before we can fully recover, our optimism based on the strength of our brand, and also the strategies and initiatives which we need to increase in sales,” said Starbucks CFO Pat Grismer.

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