On Thursday, the coffee king said comparable store sales in the U.S. rose a scant 3% for the three months ended April 2, 2017, mimicking its first-quarter showing. Analysts surveyed at Factset were looking for same-store sales growth of at least 3.7%. In China, comparable store sales climbed 7%.
New Starbucks CEO Kevin Johnson, who took over from longtime leader Howard Schultz earlier this month, predicted stronger revenue growth in the U.S. for the second half of 2017. He contended that the U.S. business is accelerating and performance in China is vigorous.
Earnings of 45 cents a share only came in line with analysts' projections. The company posted revenue of $5.3 billion, missing Wall Street's projections for $5.42 billion. Starbucks lowered its full year earnings outlook to $2.08 to $2.12 a share from $2.12 to $2.14 a share, citing investments in its new roastery stores and weak results from Teavana.
Shares of Starbucks dived to 4.6% $58.50 in pre-market trading on Friday.
One highlight from the otherwise dreary earnings day is that Starbucks is beginning to take action to relieve long-running congestion at its stores, said Johnson in part by better using mobile order and pay.
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Johnson pointed out that in the company's first quarter, when then-CEO Schultz acknowledged the overcrowding issue, 1,200 of Starbucks stores were experiencing 20% or more of its sales through mobile pay. Now, it's its 1,800 stores that deal with the 20% traffic.
In March and April, Johnson said Starbucks "saw measurable progress in these busiest stores," because of key actions. The company has hired more baristas for its high-traffic stores and launched a tablet-based device coined "dom" that allows workers to track mobile orders easier and sends customers an alert on their phones when their order is ready.
Coupled with the launch of the popular unicorn frappe this month, Starbucks sales in the U.S. have picked back up. But, some on Wall Street remain skeptical.
"Perhaps same-store sales have sustainably turned a corner, but we are not ready to make that call yet given several quarters of deceleration and disappointment," Credit Suisse analyst Jason West wrote in a note on Friday.
Still, Starbucks tossed investors a curveball by saying it's reviewing its Teavana mall stores due to a prolonged run of weak traffic and losses. A closing of the stores would be a black eye to Starbucks. Teavana is Starbucks' biggest acquisition in its history as it spent $620 million on the business in 2012.
Says BMO Capital Markets analyst Andrew Strelzik,"Starbucks fiscal second quarter operating performance was broadly softer than we anticipated and the guidance reduction adds fuel to the bear case for the stock."
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Updated from April 27 with new details.
Jim Cramer and the AAP team hold a position in Starbucks for their Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells SBUX? Learn more now.
Editors' pick: Originally published April 28.