Slumping Starbucks lowers sales forecast

Coffee titan in transition with CEO to depart

CHICAGO • Starbucks Corp. isn’t immune from the slump plaguing the restaurant industry.

The coffee giant cited a “challenging environment” as it posted disappointing quarterly growth and cut its annual sales forecast Thursday. Starbucks now expects revenue to rise between eight per cent and 10 per cent this fiscal year. It previously had predicted a double-digit increase.

The results signal that Starbucks’ momentum is slowing, just as Howard Schultz prepares to leave his post as chief executive officer in April. A shift toward online shopping — coupled with consumer uncertainty that’s lingered from the U.S. presidential election — may be keeping some customers at home. Low grocery prices also are making restaurants seem relatively expensive to Americans.

Another concern: Starbucks no longer has much room to grow in its home market, said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

“Starbucks is really starting to hit the saturation point in the U.S.,” she said. “The question with that is how are they going to continue to grow same-store sales.”

The stock fell as much as 3.8 per cent to US$56.26 in late trading after the results were released. Starbucks’ shares had increased 5.3 per cent this year, outpacing the 2.6 per cent gain of the Standard & Poor’s 500 Index.

Same-store sales rose three per cent in the first quarter, which ended on Jan. 1. Analysts surveyed by Consensus Metrix predicted a 3.7 per cent gain for the period.

Sales decreased one per cent on that basis in Europe, the Middle East and Africa, compared with a 1.8 per cent growth projection. They rose three per cent in the Americas, short of the 3.9 per cent estimate.

Starbucks’ bottom line fared better. The company posted earnings of 52 cents a share, excluding some items, which matched analysts’ predictions. The company also reaffirmed its profit forecast, saying adjusted earnings will be US$2.12 to US$2.14 a share.

Starbucks has been trying to improve its food in the U.S. to lure more customers, especially beyond morning hours. This year, the company is adding fancier items to its menu, including Sous Vide Egg Bites and a glutenfree