Starbucks Q4 disappoints; to launch credit card

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Starbucks Q4 disappoints; to launch credit card

By Marianne Wilson - 11/03/2017
Starbucks is feeling the heat from higher-end and lower-end competitors.

The coffee giant cut back its profit forecast on the heels of disappointing fourth quarter sales, which were impacted in part by two back-to-back hurricanes. Starbucks also announced deals to sell its Tazo tea brand to Unilever and to launch a credit card with Chase.

Starbucks posted total revenue in the quarter, ended Oct. 1, of $5.7 billion, flat with the year-ago period. Analysts had expected $5.80 billion.

Global same-store sales increased 2%, fueled by a 2% increase gain in the average ticket and a 1% increase in the number of transactions. Excluding the impact of Hurricanes Harvey and Irma, global comparable sales rose 3%. In the U.S., same-store sales rose 3%.

Starbucks' performance in the overall Asian region, which it has targeted as its biggest growth opportunity, disappointed analysts. Same-store sales in the region increased 2%, missing analysts' predictions of a 3.2% gain. However, same-store sales rose 8% in China, the Asian country that is Starbucks' major expansion target.

Excluding some items, profit came in at 55 cents a share, which was in line with analysts’ forecast.

"Starbucks delivered solid top and bottom line growth -- and our strongest quarterly traffic number in the U.S. since mid-2016 -- despite a difficult operating environment in both the quarter and year,” said Scott Maw, CFO.

On the company's quarterly call, Starbucks said it would launch a co-branded Chase Visa credit card this winter. It will enable customers to receive Starbucks Rewards with company purchases they make in and out of Starbucks' stores. A prepaid card is also in the works, and will come out later.

The chain trimmed its long-term earnings target to growth of 12% or greater per share compared with its previous estimate of 15% to 20%. It also cut its global long-term same-store sales growth forecast to 3% to 5% from 4% to 6%

Starbucks put its total store count at 27,339 across 75 countries.

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