Reigniting Starbucks’ sales first order of business for new CEO

Starbucks’ new CEO, who took the job this month, isn’t getting much of a honeymoon.

The company’s shares declined as much as 5.4 per cent in early trading Friday after quarterly sales missed analysts’ estimates, renewing concerns that competition and mobile-ordering problems are weighing on growth.

Same-store sales — a key benchmark — rose three per cent last quarter, the company said Thursday after the markets closed. Analysts polled by Consensus Metrix projected a 3.6 per cent gain.

The results leave it up to chief executive officer Kevin Johnson to reassure investors he has a plan for reigniting sales — especially as cheaper rivals target his company’s market share. McDonald’s has been advertising $1 and $2 drink specials this year, while the Dunkin’ Donuts loyalty program is drawing more converts.

“It seems likely slower sales growth in the U.S. may become the new norm,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “There is an awful lot of competition out there.”

Starbucks also has suffered problems with its much-vaunted mobile-ordering technology. As more customers embrace the platform, it has caused traffic jams within cafés. Starbucks warned earlier this year that the problems were taking a toll on results.

“It isn’t that surprising that they were not able to solve mobile-related traffic issues in one quarter,” she said. “That type of operational analysis and change takes time.”

Revenue amounted to $5.3 billion in the fiscal second quarter, which ended April 2. That was short of the $5.42 billion projected by analysts. Excluding some items, profit was 45 cents a share. That matched analysts’ estimates.

Starbucks missed analysts’ projections in all its major geographic areas, including the China AsiaPacific region that’s seen as key to its future. Same-store sales in that part of the world rose three per cent last quarter, compared with a 4.7 per cent estimate.

They also gained three per cent in the Americas, missing the 3.5 per cent projection. In Europe, the Middle East and Africa, the sales fell one per cent. Analysts were looking for a 0.2 per cent increase.

Johnson, a longtime technology executive, stepped into a CEO job that was held by Howard Schultz — the man responsible for building Starbucks into a household name.

Though Schultz is staying on as chair, providing continuity to the business, the leadership change has made investors nervous. When Johnson’s appointment was announced last year, the news sent the stock tumbling.