Starbucks misses sales estimates on China COVID-19 curbs

STARBUCKS Corp. suspended its guidance for the rest of its fiscal year on Tuesday as sales growth missed Wall Street targets due to China’s tough coronavirus disease 2019 (COVID -19) curbs.

Comparable sales in China, where the chain has rapidly expanded in recent years to tap rising coffee consumption, declined 23%, overshadowing 12% growth in North America.

China’s strict lockdown measures to meet its zero-COVID-19 policy have upended operations of most global companies that have a significant presence in the Chinese market, including Apple, Gucci-parent Kering and Taco Bell-owner Yum China.

“I remain convinced Starbucks’ business in China will be eventually larger than our business in the US,” Chief Executive Officer Howard Schultz said in a call with investors.

The company expects “even greater impact” to its third-quarter results because of the timing of lockdowns in Shanghai and resurgence of the virus in Beijing and other cities.

Even so, demand in its US stores has been “relentless,” Mr. Schultz said. Shares rose 5% in extended trading following the results.

Global comparable sales at Starbucks, which recently brought Mr. Schultz back to lead the company amid a wave of unionization at its US stores, rose 7% in the second quarter, while analysts polled by Refinitiv had expected 7.1% growth.

More than 50 US cafes have elected to join the Workers United union out of roughly 240 altogether that have sought to hold elections since August.

Despite already raising wages since last year, the company will invest an additional $200 million in fiscal 2022 to lift pay for store managers, increase training, revitalize its “Coffee Master” program for baristas and launch an internal app to communicate directly with its 240,000 US employees.

The firm will also accelerate the rollout of new ovens and espresso machines and speed up maintenance and repairs.