Starbucks stock tumbled after the release of its Q1 report as earnings fell more-than-expected due to the COVID-19 pandemic and earnings per share forecast below analyst estimates. Sales in China and digital sales showed growth. Starbucks chief operating officer Rose Brewer will leave the company to head Walgreens.
Shares of Starbucks (SBUX), which gained nearly 37% over the past six months, were down 2.5% on Tuesday after the close of trading as investors reacted to the company’s released quarterly report and forecasts.
In addition, Starbucks announced the departure at the end of February of its COO Rose Brewer, who will become Walgreens’ next CEO. Brewer’s responsibilities will be shared among other members of the leadership team.
Starbucks announced earlier this month that CFO Pat Grismer is leaving the company in response to his retirement.
In the first quarter of fiscal year 2021 ending in December, Starbucks reported a decline in global sales due to a 19% drop in the number of transactions worldwide, which was partially offset by a 17% increase in the average check.
Starbucks’ results continued to be impacted by the COVID-19 pandemic and stricter quarantine measures in the US, UK and other countries due to rising incidences and restrictions on international travel.
Starbucks ‘earnings per share fell 23% (yoy) to $ 0.61, but was $ 0.06 more than analysts’ estimates of $ 0.55. Total profit for the quarter was $ 622.2 million, up from $ 885.7 million a year earlier.
Total revenue fell 5% to $ 6.75 billion, the worst drop than analysts expected on average, estimating Starbucks ‘quarterly revenues at $ 6.93 billion. Starbucks’ quarterly revenue and earnings statistics for the last 2 years are available here …
Details of the report
Starbucks’ US revenue declined 5% in the first quarter (the largest drop of 8% occurred in December), but better than the 9% drop in the previous 4th quarter.
Revenue in China returned to growth, showing a 5% increase, suggesting that Starbucks is recovering sales when COVID-19 incidence is falling. The US and China are the two largest markets for the company, with 61% of its coffee shops in these markets (15,340 and 4,863 in the United States and China, respectively).
An important achievement for the Starbucks holiday quarter was the 15% increase in active Rewards program members to 21.8 million. Mobile orders accounted for a quarter of transactions, up from 17% before the pandemic crisis.
The company opened 278 new cafes during the quarter, up 4% from a year ago, and currently serves about 33,000 locations.
Starbucks forward-looking statements
Starbucks CEO Kevin Johnson commented on the report that he was “very pleased with the start of sales in fiscal 2021,” and that the company expects US sales to rebound by the end of the second fiscal quarter to about 5-10% growth.
Starbucks expects earnings in the current quarter of $ 0.45 to $ 0.50 per share, well below analysts’ estimates of $ 0.59 per share.
The company raised its earnings per share forecast for full FY2021. year: from a range of $ 2.34 – $ 2.54 to $ 2.42 – $ 2.62, but this is also below analytical expectations of $ 2.81 earnings per share.
FY2021 revenue forecast year is $ 28 billion – $ 29 billion against analysts’ estimates of $ 28.5 billion.
On January 19, Goldman Sachs analyst Jared Garber initiated a Buy rating on Starbucks with a target price of $ 115 (9.9% upside). Garber pointed to the company’s benefits from the digital sales model and renewed economic growth in 2021.
Starbucks expects global sales to grow 18-23% this fiscal year and plans to expand its global network, including opening 600 stores in China.