Starbucks (SBUX) has reported that global comparable store sales plunged 10% in the fiscal second quarter, slightly worse than the -9.7% Street estimate. Shares in SBUX dropped just over 1% in after-hours trading on Tuesday.
In the US, comparable sales dropped 3%, driven by a 7% decrease in comparable transactions, but partially offset by a 5% increase in average ticket size.
However, the company intends to reopen stores for takeaway service as soon as early May, while by early June, CEO Kevin Johnson expects 90% of Starbucks-operated stores in the US to have returned to business.
“This monitor and adapt phase in the US is the inflection point for reopening stores and begins a recovery process that requires ongoing monitoring, community by community, to rapidly adapt and drive the recovery,” he commented on the earnings call.
“We are leveraging our experience in China to inform our actions in other markets, including the U.S., where we are now entering the ‘monitor and adapt’ phase to reopen many more stores with best-in-class safety protocols” said Johnson.
Substantially all existing Starbucks stores in China have now reopened with modified operations, while new store locations are being added and, according to Starbucks, customer engagement continues to grow.
Nonetheless the company still expects China comparable sales growth to fall -25% to -35% in the fiscal third quarter year-over-year, and -10% to flat in the fourth quarter. That’s with at least 500 new stores in China and capital expenditure of $1.5 billion for fiscal year 2020.
Overall, Starbucks reported a small revenue beat for the quarter, with FQ2 revenue of $6 billion down 5% year-over-year due to the adverse impact of Covid-19. Meanwhile Q2 Non-GAAP EPS of $0.32 fell in-line with consensus, but the company warned that COVID-19 impacts are expected to intensify in Q3 before moderating in Q4.
Analysts rate SBUX as a Moderate Buy right now, with an average analyst price target of $79 (0.5% upside potential). In the last three months, 11 analysts have called the stock a buy, with 15 analysts preferring to remain on the sidelines. (See Starbucks stock analysis on TipRanks).