Coffee giant meets profit expectations but sales miss

Starbucks Corp. met profit expectations for its second quarter even as its sales disappointed.



The retailer’s net earnings increased 13.5%, to $652.8 million, or 45 cents a share, in line with expectations. Revenue totaled $5.28 billion, less than expected.



Same-store sales rose 3%, also below forecasts, as average tickets rose 4%. Customer transactions were down 2%, which the company attributed to a change in its rewards program.



Starbucks has been battling increased competition from such lower-priced brands as McDonald’s and Dunkin’ Donuts. The coffee giant has also been plagued with problems related to its popular mobile ordering system, which has caused lines in its stores and disgruntled customers.



U.S. membership in Starbucks Rewards increased 11% year-over-year to 13.3 million members. The program accounted for 36% of U.S. company-operated sales in the quarter. Online commerce is also on the rise, with mobile payment accounting for 29% of sales and mobile order and pay growing to 8% of transactions.



“With our U.S. business accelerating throughout the quarter and strong performance in China, we are poised to deliver strong revenue growth in the second half and into the future,” said Starbucks new CEO, Kevin Johnson. “Our success in opening over 2,000 stores around the world annually, delivering record AUV and profit, despite a very difficult period for many brick-and-mortar retailers, is a testament to the 330,000 partners who proudly wear the green apron.”



Starbucks ended the quarter with 26,161 stores in 75 countries globally. It opened 427 net new stores in the quarter.