Interrupted frappuccino momentum. Weakened consumer confidence. Civil unrest.
Calling the 4% growth in U.S. same-store sales an "anomaly," Starbucks (SBUX) management said during the earnings call that several factors contributed to weaker-than-expected comps in the third quarter, including the rollout of the tweaked Starbucks Rewards loyalty program that threw the company's regular summer promotion schedule off balance and "interrupted frappuccino momentum in the quarter."
CEO Howard Schultz called the environment "quite unusual," and different from previous stretches that have experienced economic downturns, but sounded bullish on regaining comp momentum going forward as the new program changes were a "one-time event."
Starbucks Full-Year Estimates
Starbucks cut full-year global same-store sales growth outlook to mid-single digits, down from prior guidance for "somewhat above mid-single digits," as third-quarter revenue left investors with a bad taste in their mouths.
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The global coffee-shop titan also said it now sees full-year consolidated revenue growth of 10%, down from prior guidance for "10%+" growth. It reaffirmed EPS of $1.88-$1.89 for the year, and anticipates per-share profit of 54-55 cents for Q4, on the light side of current Street views for 55 cents a share.
In Q3, adjusted earnings grew 17% to 49 cents a share, matching views, while sales fell short of estimates with 7% growth to $5.24 billion. Analysts had expected $5.33 billion.
Shares fell 3% in late trading in the stock market today after closing up 0.1% in regular trade Thursday. The stock may test its 50-day moving average at Friday's open, after retaking that key line in late June.
For the quarter, global same-store sales rose 4%. Americas same-store sales grew 4%. China/Asia Pacific comps rose 3%. Comps in China, a high-growth market of heavy focus for the company, alone grew 7%.
Starbucks Loyalty Tested
Java drinkers apparently didn't mind the loyalty program changes. Starbucks Rewards grew its U.S. membership base by 18% from the prior year to 12.3 million active members. The company recently announced price hikes to some of its beverages.
And its mobile push appears to be enjoying solid momentum, with mobile payments now accounting for 25% of all transactions. Its order-in-advance feature, Mobile Order And Pay, now makes up 5% of all orders, said the company.
Smaller coffee rival Dunkin' Brands (DNKN), the parent of Dunkin' Donuts and Baskin-Robbins, reported a mixed bag earlier Thursday.
Profit growth of 14% to 57 cents a share topped estimates by a penny, but 2% sales growth to $216.3 million missed views for $219.9 million. Dunkin' Brands closed down 0.7% to 46.74 after falling as low as 44.75.
Restaurant peer Chipotle Mexican Grill (CMG) also reported after the close Thursday and missed earnings and revenue forecasts but said same-store sales trends in July were improving. Chipotle stock fell modestly in late trading.
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