Earnings

Starbucks outpaces earnings estimates but warns coronavirus could hit fiscal 2020

Starbucks President and Chief Executive Officer Kevin Johnson is pictured at the Annual Meeting of Shareholders in Seattle, Washington on March 20, 2019.

Jason Redmond | AFP | Getty Images

Starbucks is expected to report its fiscal first-quarter earnings after the bell Tuesday.

Here’s what Wall Street analysts surveyed by Refinitiv are expecting:

  • Earnings per share: 76 cents expected
  • Revenue: $7.11 billion expected
  • Global same-store sales: 4.4% expected

The global coffee chain’s quarterly results will include its holiday sales. In addition to its usual lineup of drinks like the gingerbread latte, Starbucks also introduced the Irish Cream Cold Brew midway through the holiday season. The drink was Starbucks’ latest move to appeal to its growing customer base that prefers cold drinks, even in the winter.

Starbucks executives will likely face a flurry of questions about their response to the Wuhan coronavirus outbreak, which has claimed more than 100 lives in China so far. The coffee chain has closed all cafes and halted delivery for locations in the Hubei province, where the virus originated. Bernstein analyst Sara Senatore estimates that amounts to roughly 3% of its Chinese locations. China is Starbucks’ second-largest market, behind the United States.

The Seattle-based company is facing another threat to its Chinese business: Luckin Coffee. The fast-growing Chinese coffee chain surpassed Starbucks’ number of locations in China at the end of 2019, making it the largest coffee chain in the country. The majority of Luckin’s coffee shops are small and optimized for pickup from busy customers. Starbucks also competes with Luckin when it comes to beverage delivery.

On Monday, a Luckin spokesperson said the company proactively closed its coffee stores in Wuhan for the Lunar New Year holiday and has strict nationwide policies in place to monitor the situation.

In fiscal 2020, Starbucks expects to add 2,000 net new locations worldwide. It is forecasting its fiscal 2020 revenue to rise between 6% and 8% and global same-store sales growth in a range of 3% to 4%.

A week ago, Starbucks shared its long-term goal of becoming “resource positive,” meaning that it would store more carbon than it emits, eliminate waste and provide more freshwater than it uses. Part of its plan to reach such an ambitious goal includes adding more plant-based menu options and shifting to reusable packaging.

Starbucks’ stock, which has a market value of $104 billion, is up 32% over the last 12 months.

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