Investors are treading lightly when it comes to Starbucks Corp.’s (NASDAQ:$SBUX) stock. After rising slightly during the day following news of the company’s acquisition of its East China operations, it fell again following its release of its third-quarter earnings. During after-market trading on Thursday, July 27, Starbucks’ stock went down as much as 4.54%.
For its third-quarter, Starbucks reported an earnings per share of $0.55, exactly the same as the average analysts’ expectation. However, revenue was $5.67 billion, which came in below average analysts’ expectation of $5.76 billion.
In the U.S., Starbucks’ same-store sales increased by 5% in the third quarter and mobile-and-pay orders made up 9% of all transactions.
Despite a passable performance this quarter, the challenges that the retail industry are struggling with today has made Starbucks CEO Kevin Johnson cautious for Starbucks’ fourth quarter. During the company’s earnings call, Starbucks’ chief financial officer (CFO) Scott Maw announced a slight change in the company’s outlook. For full-year revenue, Starbucks is expecting a growth between 8% to 10%. Comparable store sales is expected to grow by 3% to 4% and earnings per share is expected to grow by 12% to 13%.
Besides its earnings, Starbucks also announced that it’s closing 379 of its Teavana locations. The company had purchased the Teavana brand back in 2012 for $620 million. “Tea is a large, fast-growing market. We have big plans for tea, but as we shared on our last call, many of our mall-based Teavana stores have been underperforming,” Johnson said of Starbucks’ decision.
In addition, Starbucks is also working through one of the hardest challenges it’s had to face: reducing congestions in its shops. When Johnson took over for Howard Schultz – now executive chairman at Starbucks – as CEO in April, he also became responsible for leading the company through this challenge. Several investors believe that Johnson has been doing pretty well so far by hiring more staff for stores with higher traffic and launching the “dom”. The “dom” is a tablet-like device that allows staff to track mobile orders better. It also allows staff to send mobile alerts to customers after their orders are completed. As of right now, the “dom” is being used at 1,000 of Starbucks’ busiest stores.
Even with a slightly disappointing third quarter, a cautious outlook for its fourth quarter, and Teavana store closures, it’s not all bad news. Maw predicted that Starbucks’ purchase of its East China operations should add about $1 billion in revenue for 2017. The company still shows some promise in future growth.
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