Starbucks targets China mart as global quarterly sales fall flat

NEW YORK: Starbucks Corp’s latest quarterly sales missed Wall Street’s projections in much of the world, putting new pressure on its plan to turn China into its biggest growth engine.

Same-store sales increased four per cent last quarter, missing the 4.8 per cent estimate of analysts, and the company cut its profit guidance for the full year.

Starbucks also admitted defeat in its effort to run a chain of tea shops, saying it would shutter its Teavana stores, a move that would eliminate 3,300 jobs.

The tepid results sent shares plunging and followed Starbucks’s agreement earlier on Thursday to buy out its East China joint venture for US$1.3 billion (RM5.57 billion), the biggest deal in the company’s history.

This will allow it to take full control of 1,300 cafes in the world’s most populous country, where it sees a nascent coffee culture becoming a huge market.

With Starbucks reaching a saturation point in many places, China looms larger than ever as key to the chain’s prosperity.

“The growth opportunity in China is unparalleled,” said chief executive officer Kevin Johnson.

Excluding some items, earnings amounted to US$0.55 in the in the third quarter, which ended July 2. That matched analysts’ estimates. Revenue climbed to US$5.66 billion, short of the US$5.76 billion projection.

Starbucks sees profit for the full year at US$2.05 to US$2.06 a share, down from previous guidance range of US$2.09 to US$2.12, because of slower growth in the United States.

Tea remains more popular than coffee in China, but Starbucks is making inroads. Same-store sales — a key benchmark — rose seven per cent last quarter.

Starbucks currently operates about 2,800 locations in China, with plans to hit 5,000 by 2021. And the business there would eventually be bigger that its operations in the US, said Johnson. Bloomberg