Yesterday, on June 19, Starbucks (SBUX) announced that it’s expecting global SSSG (same-store sales growth) of 1% for its fiscal third quarter. The guidance was lower than analysts’ expectation of 3%.
Management also said the company would be closing 150 underperforming stores in fiscal 2019 against an average of 50 closures per year. The announcements seem to have caused SBUX stock to fall 4% in pre-market hours today.
Starbucks management said that the Philadelphia incident, which occurred in mid-April, led to a two-week delay in the launching of its marketing campaign, which was focused on an afternoon daypart. It blamed lower SSSG in early May on the delay. However, the company claimed that its SSSG started to improve with the launching of its marketing campaign and racial bias training in May.
In China, its SSSG was negatively impacted by a decline in delivery sales. Before the beginning of the quarter, third-party services took orders from customers and delivered the orders. However, Starbucks claimed that the service was not so good and was creating annoyances, which led to a fall in the company’s delivery sales.
Year-to-date stock performance
Starbucks stock has been flat since the beginning of the year. It has been negatively impacted by slowing SSSG in the United States and contracting operating margins. The retirement of Howard Schultz, its executive chairman, has affected the stock.
Its peers Dunkin’ Brands (DNKN) and McDonald’s (MCD) have returned 6.8% and -4.2%, respectively, year-to-date. The broader comparative indexes, the S&P 500 Index (SPY) and the Consumer Discretionary Select Sector SPDR ETF (XLY), have returned 3.7% and 13.3%, respectively.
Next, let’s look at Starbucks’s strategy for growth.