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Starbucks Cools Despite Quarterly Earnings Beat

Starbucks trades lower despite posting quarterly earnings that beat analysts’ forecasts and saying it expects to fully recover from the pandemic next year.

Starbucks  (SBUX) - Get Starbucks Corporation Report shares traded lower on Friday, despite the coffee-chain giant reporting fiscal fourth-quarter earnings and sales that beat analysts’ forecasts, and saying that it expects to fully recover from the pandemic next year.

Shares of Starbucks were down 2.71% at $85.91 after the Seattle-based coffee company posted adjusted earnings of 51 cents a share, topping analysts' forecasts. Sales were $6.2 billion vs. $6.06 billion expected by analysts.

The company said it lost $1.2 billion in sales because of the pandemic.

Starbucks said that while global same-store sales fell 9% during the quarter and the number of transactions declined, customers are spending more on treating themselves to higher-priced hot and cold specialty drinks and snacks.

In the U.S., September same-store sales declined a more moderate 4%, bolstered by the return of the company’s high-demand Pumpkin Spice latte.

Consumers also have been shifting their buying patterns. Through the pandemic, U.S. sales have migrated from cities to suburbs and mornings to late mornings, Starbucks said, with weekend sales outpacing weekdays - helping mitigate sales declines at work-oriented locations.

Growth in China also helped bolster the company’s bottom line during the quarter. Starbucks opened 260 stores in the July-September period in China, where it now has just more than 4,700 stores.

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Starbucks said 98% of its company-owned stores are now open. Limited or full lobby seating is now available in 63% of U.S. stores and 90% of stores in China.

Looking forward, Starbucks said it expects to fully recover from the pandemic in its next fiscal year, anticipating opening 2,150 new stores globally. It expects to earn between $2.70 and $2.90 an adjusted share on revenue of $28 billion to $29 billion in fiscal 2021.

Global same-store sales are expected to grow 18% to 23% for the year, with U.S. same-store sales forecast to increase 17% to 22%.

"The better-than-expected result and steady recovery in business trends gives us confidence that Starbucks will continue to execute in the future," said Jim Cramer and the Action Alerts PLUS team, which holds Starbucks in its portfolio. 

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