SBUX Starbucks Corporation

By Heather Haddon 

Starbucks Corp. said the coronavirus epidemic sapped millions of dollars in revenue from its China business, and the coffee giant plans to suspend work to open new stores in the country.

The Seattle-based coffee chain said the virus had reduced revenue expectations in its second-biggest market by at least $400 million for its current quarter. The company reported $745 million in sales in China during the previous three-month period, its fiscal first quarter ended Dec. 29.

Starbucks expects same-store sales to drop 50% in its second quarter in China, as opposed to the 3% growth previously expected, the company said in a filing Thursday. Disruptions in sales, as well as the company's plan to continue to pay workers despite store closures, are expected to result in an earnings-per-share loss of 15 to 18 cents.

S&P Global lowered its revenue and earnings forecasts for Starbucks after the company's filing, but kept its outlook on the chain. S&P said Starbucks has a sufficient financial cushion to weather an epidemic-related slump at its China operations.

Shares in Starbucks were flat at $76 in after-hours trading.

The chain said same-store sales in China plunged 78% in February compared with previous year as it closed locations, reduced operating hours and served fewer customers. The chain closed more than 2,000 of its stores in China earlier this year as the virus spread. The chain said Thursday that more than 90% of its 4,300 stores in China were open, but operating under elevated safety protocols and restrictions.

Starbucks has also stepped up cleaning at its U.S. stores. The company said Thursday that the epidemic hasn't materially affected its U.S. business.

China has been a focus of Starbucks's growth strategy. Unlike in other foreign markets, it owns all of its stores in the country.

The company said it was temporarily suspending new-store development in China. Openings that were planned for some locations this fiscal year will likely occur next year instead, the company said.

"We remain confident in the strength of the Starbucks brand and the long-term profitability and growth potential of our business in China," the company said.

Starbucks said it had also temporarily closed locations in Italy, Japan and South Korea, or had fewer customers at stores in those countries. South Korea is a big market for Starbucks, with 1,380 locations.

"We are prepared to respond to any situation that may unfold in any of our markets around the world," the company said.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

March 05, 2020 18:38 ET (23:38 GMT)

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