Starbucks reported another quarter of disappointing sales and lowered its profit forecast, missing analysts’ same-store sales target amid competition at both the high and low ends of the coffee market.
For the fourth quarter, the coffee giant’s net income attributable to the company fell 1.6% to $788.5 million. On an adjusted basis, it earned 55 cents per share, in line with Wall Street targets.
But comparable stores sales rose only 2% for the quarter ended Oct. 1. Excluding the impact of Hurricanes Harvey and Irma, they would have been up 3%, still short of analysts’ 3.2% estimate.
On news of the earnings, Starbucks shares fell 3.4% in extended trading Thursday but rallied Friday, rising 2.7% to $56.34. Officials offered a rosy perspective on its fourth-quarter performance.
“Starbucks delivered solid top and bottom line growth – and our strongest quarterly traffic number in the U.S. since mid-2016 – despite a difficult operating environment in both the quarter and year,” CFO Scott Maw said in a news release.
“Continued strong growth and performance from [the China and Asia Pacific region] demonstrates that Starbucks now has two significant profit engines driving our global returns, our North America business and the broader CAP market,” he added.
Same-store sales from China were up 8% in the latest quarter, but the broader China and Asia Pacific region posted a rise of 2%, versus expectations of 3.2%.
As Reuters reports, Starbucks is being “squeezed by competitors ranging from boutique coffee sellers like Intelligentsia [to] lower-price rivals including McDonald‘s,” which recently expanded its McCafe menu with new macchiatos and lattes and is selling small McCafe espresso drinks for $2.
CEO Kevin Johnson told Reuters there was no evidence Starbucks was being hit by competition. “We are not going to be squeezed in the middle,” he said.
But on an earnings call, Maw said, “With competitive pressures on the rise, we remain laser-focused on driving profitable share growth as we head into calendar 2018.”
Starbucks on Thursday also cut its long-term earnings growth target to 12% or greater from the previous 15% to 20%.