Published: Thu, June 21, 2018
Culture | By Jeremy Gray

Starbucks provides weak sales outlook, will close 150 stores

Starbucks provides weak sales outlook, will close 150 stores

The company will triple its traditional annual average of closing about 50 stores as part of a streamlining effort including rapidly optimizing its USA store portfolio. The stock slumped 3.5 percent in after-hours trading, according to a Starbucks press release.

"We've got to be much more disciplined in setting our priorities", Starbucks Chief Executive Kevin Johnson said in a Wednesday interview with CNBC.

Morgan Stanley analyst John Glass, who downgraded the stock to "equal-weight" from "overweight", expressed surprise at Starbucks' expectations for China, and said the overall forecast raised questions about the sustainability of Starbucks' growth back home. The store closings will reportedly be focused on urban areas with a higher concentration of Starbucks locations.

Starbucks Corp forecast on Tuesday slower sales growth than Wall Street expected this quarter and plans to close about 150 US cafes next fiscal year to boost performance, sending its shares down 2 percent after hours.

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Although business overseas has been booming and the chain has been opening more and more cafes, USA sales growth has stalled for the company that brought espresso to the masses. "That becomes an area of concern for Starbucks". Outgoing company chairman Howard Schultz said the closing may have cost the company tens of millions of dollars, although Johnson said that is not an excuse for the sales performance.

On Tuesday, Starbucks said that it will return more cash to shareholders-about $25 billion in buybacks and dividends through fiscal 2020, representing a $10 billion increase from the previous guidance.

The chain is also relying on its digital initiatives to contribute between 1 and 2 percent to comparable sales next fiscal year. New cafes will continue to open in markets that demand it, the company said, and it is "actively exploring strategic options to license company-operated stores in other appropriate markets".

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