Starbuck Q2 Earnings to Fall 46% Due to Coronavirus

Coffee giant Starbucks is definitely not immune to the impact of the deadly coronavirus pandemic that hit the world.

The company revealed this week that second quarter earnings would fall 46% as coronavirus hit its sales. Starbucks said on Wednesday that it now expects fiscal second quarter adjusted earnings of 32 cents per share. This is down from 60 cents in the year ago period.

The company also withdrew its outlook for fiscal 2020, citing the “dynamic nature” of the coronavirus crisis. Starbucks’ fiscal 2020 revenue was expected to rise between 6% and 8% and global same-store sales growth was forecast to be in a range of 3% to 4%.

“This includes inventory write-offs, honoring supplier obligations, store safety-related items, asset impairments and preliminary estimates of certain government stimulus program benefits,” the company said.

Starbucks said that U.S. same-store sales fell 3% during the quarter, “reflecting the very rapid onset of COVID-19 business impacts in the final three weeks of the quarter.” In the quarter up to March 11, U.S. same-store sales grew 8%.
Shares of Starbucks were falling 2% in after-hours trading and have fallen around 18% since the year started.

U.S. and Canadian employees will however continue to be paid through May 3, even if baristas are not working. Employees who do work will receive an extra $3 per hour.

“While all of these trends are positive and we are optimistic they will continue, future progress may not be linear and will be impacted by prevailing, external conditions and local safety guidelines,” CEO Kevin Johnson and CFO Pat Grismer wrote in a letter to shareholders.

Starbucks also said that it is pausing its buyback program. “Given our financial strength as an enterprise, we are confident that we will be able to maintain appropriate liquidity as we manage through the current crisis,” Johnson and Grismer wrote.

The company will report its full second-quarter results on April 28th.

Disclaimer: We have no position in Starbucks Corporation (NASDAQ: SBUX) and have not been compensated for this article.