SBUX Starbucks Corporation

By Julie Jargon 

Starbucks Corp. says it has become a victim of the success of its mobile order app.

The coffee chain created the app to reduce long lines at the cash register, but Starbucks Operating Chief Kevin Johnson said Thursday the lines have just shifted to the pickup counter.

"The success of mobile order-and-pay has created a new challenge," Mr. Johnson said in an interview.

Mr. Johnson, who will become chief executive in April when Howard Schultz steps down to focus on building high-end Starbucks stores, said long waits have driven away some potential customers. The number of transactions in the company's fiscal first quarter were down as a result.

Starbucks posted a 3% increase in U.S. same-store sales growth in the quarter ended Jan. 1, but analysts were expecting 4% growth. It marks the company's fifth consecutive quarter of missed expectations for same-store sales in the U.S., its largest market. Growth came from a 5% increase in the price of an average purchase, offset by a 2% decline in transactions.

U.S. sales have slowed repeatedly in recent quarters. Starbucks previously blamed the economy. The company has said it would return to its historic same-store sales growth rate of 5% in the U.S., though it hasn't said when.

Mobile order-and-pay represented 7% of U.S. company-operated transactions in the quarter, up from 3% in the prior year. The number of its highest-volume stores for mobile order-and-pay, where orders placed via the app account for more than 20% of transactions during peak hours, doubled to 1,200 stores over the prior quarter.

Mr. Johnson said the company plans to fix the problem with better signage, text messages telling customers when their orders are ready, and the deploying of employees to hand off mobile orders.

Starbucks lowered its revenue forecast for the year while posting revenue for the latest quarter below expectations. Shares, up 5.3% this year through Thursday's close, fell 4.4% after hours to $55.90.

The company expects revenue growth for 2017 of 8% to 10%, compared with prior guidance for double-digit growth. Starbucks backed its guidance for earnings of $2.12 to $2.14 a share.

Starbucks earned $751.8 million, or 51 cents a share, up from $687.6 million, or 46 cents, the year before. Excluding certain items, profit rose to 52 cents a share from 46 cents a share a year earlier.

Revenue rose 6.7% to $5.73 billion. Analysts surveyed by Thomson Reuters had forecast earnings of 52 cents on $5.85 billion in sales.

Starbucks reported that global same-store sales rose 3% in the quarter. Same-store sales in Europe, Middle East and Africa declined 1% from the year-ago period. The company said that number only includes company-owned Starbucks and that many stores in that market have become licensed by other operators and aren't counted in that result.

China and the Asia Pacific region posted a 5% same-store sales increase. China, expected to overtake the U.S. as the chain's largest market, posted a 6% increase in same-store sales.

--Anne Steele contributed to this article.

Write to Julie Jargon at julie.jargon@wsj.com

(END) Dow Jones Newswires

January 26, 2017 18:34 ET (23:34 GMT)

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