Starbucks (SBUX) said Tuesday that it will expand its delivery partnership with Uber Eats to six U.S. cities as it seeks to kick-start domestic sales amid concerns over the pace of growth in China, where the world's biggest coffee chain is targeting a significant expansion.
Starbucks said seven cities will be part of the Uber Eats partnership by the spring of this year, enabling delivery to around a quarter of its U.S. company-owned stores, following test of the program late last year in Miami. The company also sees further international expansion later this year.
"We know we have untapped customer demand for Starbucks Delivers in the U.S. and starting today, we're expanding our best-in-class experience to our customers both in and out of our stores," said COO Roz Brewer. "We're building on key learnings from past delivery pilots and by integrating our ordering technology directly with Uber Eats, we've unlocked the ability to bring Starbucks to customers for those times when they're not able to come to us."
Starbucks shares were marked 0.77% lower in pre-market trading following the expansion announcement, indicating an opening bell price of $64.20 each, a move that extends its two-month decline to around 3.8%
Last week, Goldman Sachs analyst Karen House clipped her price target on Starbucks by $7 to $68 a share, but said she remains "reasonably confident" the group's move to drive more digital engagement can support comparable sales growth in the United States of between 3% and 4%.
However, House also noted "incremental concerns" regarding slowing China growth, where the group plans to double its store footprint to 6,000 over the next four years.
Last month, Starbucks, unveiled an aggressive expansion strategy in China that could be at risk from slowing consumer sales in the world's second-largest economy and guided investors to modestly softer long-term earnings growth.
Starbucks said it sees long-term earnings growth of around 10%, down from a previous forecast of around 12% and said same-store sales expansion will likely grow at a 3% to 3.4% rate even after a newly-unveiled partnership with Uber Eats.
"Coffee is one of the fastest growing beverage categories globally and our over 350,000 partners around the world who wear the green apron are now serving 100 million customer occasions a week," CEO Kevin Johnson told investors at the time. "We have long been performance driven while staying true to our mission and values to create positive change and global social impact. The leadership team and I believe Starbucks is better positioned than ever for continued success."
Retail sales in China rose at at the weakest pace since 2003 last month, while other portions of the economy, including new car sales, have slumped to the weakest in more than a decade as the damage from the ongoing trade war between Washington and Beijing takes its toll. In fact, China's overall GDP slowed to 6.4% last year, the weakest since 1990.
Starbucks is also facing intense competition from a new market entrant, Luckin, a China-based startup that plans to have 4,500 stores in the world's biggest coffee market by the end of this year.