Starbucks Corp stated on Wednesday that it is expecting the current-quarter income to plunge by up to $2.2 billion and the sales to fall for the rest of the year even as almost all the cafes have restarted operations after the relaxation of the coronavirus or COVID-19 lockdowns.
The firm mentioned it will permanently shut down around 400 stores in the Americas in the next 18 months and cut the planned new store openings by half to almost 300 this fiscal year, signifying the lasting impact of the outbreak.
Starbucks Corp to Close 400 Stores
The world's largest coffee chain's shares fell nearly four percent, as it also forecast a bigger-than-expected current-quarter loss and an over $3 billion fall in revenue. With the COVID-19 pandemic effectively putting a stop to dining out in most of the United States for weeks, Starbucks was forced to convert its cafes to pick-up or drive-through joints only.
The company said it would now speed up the opening of pick-up only stores, especially in urban areas, as health experts advise people to stick with social-distancing norms. Starbucks projected an adjusted loss of about 55 cents to 70 cents per share for its third-quarter ending in June and said it expects U.S. same-store sales to drop by up to 45 percent. Analysts were expecting a third-quarter loss of 16 cents per share, according to IBES data from Refinitiv.
However, declines are expected to slow towards the end of the year. The company expects same-store sales in China to drop by 20 percent to 25 percent, slightly more optimistic than an earlier forecast of 25 percent to 35 percent fall. Starbucks said it expects current-quarter operating income to decline between $2 billion to $2.2 billion. It reported an operating income of $1.07 billion in the third quarter of last year.
(With agency inputs)