Starbucks Sees Covid-19 Trimming Up to 25% of China 2020 Sales

(Bloomberg) -- Starbucks Corp. has opened almost all its locations in China, but still sees the lingering impact of the coronavirus pandemic trimming same-store sales there by 15% to 25% this fiscal year. The shares fell in late trading.

• Same-store sales fell 10% globally in the company’s second quarter, slightly outpacing the average estimate for a 9.7% decline compiled by Consensus Metrix. The measure -- a key gauge of success for restaurant chains -- fell 50% in China, which along with the U.S. is a priority market for the company.

Key Insights

• With the U.S. likely following China’s path to reopening, but on a delayed timeline, 2020 increasingly is looking like a lost year for the company. Since the pandemic started to affect U.S. sales only at the end of the quarter that ended in late March, impact on third-quarter results will be “significantly greater” and extend into the fiscal fourth quarter “at a more moderate level.”
• The company has said it will take a store-by-store approach to resuming business activity in the U.S., with locations remaining limited to drive-thru, delivery and takeout activities. Starbucks said this plan will draw on the company’s experiences in China, where 98% of stores are now re-opened and operating under modified schedules or protocols.
• One silver lining is that the Seattle-based company said its loyalty rewards program hit 19.4 million active members -- an increase of 15% from a year earlier.

Market Reaction

• Starbucks shares fell less than 1% to $78 in late trading on Tuesday.

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