Starbucks to launch credit card, sell Tazo; sales weak

Starbucks announced deals Thursday to sell its Tazo tea brand to Unilever and launch a credit card with Chase. But the coffee chain also reported disappointing fourth-quarter sales growth at stores around the world, and its shares fell more than 3% in after-hours trading.

The Seattle-based company said Unilever will pay $384 million for Tazo in a deal that is expected to be completed next year. Unilever, which owns the Lipton and PG Tips tea brands, called the acquisition a “perfect strategic fit”. Starbucks, which bought Tazo about 18 years ago for $8.1 million, said it wants to focus on its Teavana brand. Although Starbucks has been shutting down stand-alone Teavana stores, it still sells its teas in stores.

The company expects to launch a Starbucks-branded credit card with Chase this winter. A prepaid card will come later. The company said both cards will allow customers to earn Starbucks rewards when they spend. Co-branded cards, which feature a bank brand and another company, have been popular for decades as they help strengthen customer loyalty. Ride-hailing company Uber, for example, announced a card with British bank Barclays last week.

Starbucks’ financial results, meanwhile, showed slowing growth.

The chain said fourth-quarter sales rose 2% at its established locations worldwide, below the 3.3% Wall Street analysts expected, according to FactSet. During the same period a year ago, those sales grew 4%.

Overall, the company reported net income of $788.5 million, or 54 cents per share, in the three months ending Oct 1. Adjusted earnings came to 55 cents per share, matching what analysts expected. In the same period a year ago, Starbucks reported net income of $801 million, or 54 cents per share.

Revenue slipped slightly to $5.7 billion, falling short of the $5.8 billion analysts expected. Shares fell $1.82 to $53.05 after the stock market closed Thursday.