Investors were warned beforehand by Starbucks (NYSE:SBUX) earlier last month that sales for the company had taken a nosedive thanks to the coronavirus pandemic. Although the company had continued to offer drive-by coffee as an alternative, it was far from enough to shore up the already significant drop in traffic the company has seen. As such, Starbucks reported earlier on Tuesday that same-store sales witnessed a significant decline, around 10%, during the quarter, for the first time in over ten years.
Starbucks went on to add that it expects this upcoming quarter to be even worse hit by the coronavirus than this previous one and that business will remain muted for the rest of the year. The coffee giant ended up withdrawing its 2020 guidance due to the uncertainty of everything right now.
When the coronavirus first started to spread, Starbucks was one of the first companies in the food industry to respond with stringent safety overhauls. More specifically, it was one of the first business that limited dine-in service before quickly transitioning to a drive-by only model. While all this was lauded by health authorities, the move came at a significant cost for the company’s bottom line. Starbucks’ sales fell by $450 million, much of that sum going towards safety supplies or increased wages for workers.
At the moment, around half of all of Starbucks’ stores are currently closed, while the other 50% are still operating with drive-throughs as well as delivery sales. The company said that it wouldn’t be opening its stores for in-store orders anytime soon, but the coffee chain does intend to reopen many of its closed stores on a drive-through basis sometime in May. By early June, Starbucks hopes that around 90% of its stores will be running again.
To few people’s surprise, Starbuck’s Chinese business was its worst-hit business segment. Sales declined by around 90% back in January and February during the peak of the pandemic, with almost all of its stores still operating on very limited hours.
While these financial results weren’t surprising, it does mark the first time in over ten years (or around 41 quarters, to be exact) that the coffee giant hasn’t reported sales growth, with the last time this happened was back in 2009 following the financial collapse. Shares of Starbucks were up around 1.2% over the course of the day, with shares falling by around 0.8% in after-hours trading in light of this new information.
Starbucks Company Profile
Through a global chain of almost 31,800 company-owned and licensed stores, Starbucks sells coffee, espresso, teas, cold blended beverages, food, and accessories. The company also distributes packaged and single-serve coffee, tea, juice, and pastries through its own stores, grocery store chains, and warehouse clubs under the Starbucks and Teavana brands under the Global Coffee Alliance partnership with Nestle. In addition, Starbucks markets bottled beverages, ice creams, and liqueurs through partnerships with Pepsi, Anheuser-Busch, Tingyi, and Arla. In fiscal 2019, Starbucks’ Americas segment (including the U.S.) represented 69% of total revenue, followed by the International segment (including China) at 23%, then channel development at almost 8%. – Warrior Trading News
