SBUX Starbucks Corporation

By Heather Haddon 

Starbucks Corp. said global same-store sales dropped 10% in its second quarter as a result of the coronavirus crisis, the first downturn by that measure in nearly 11 years.

The coffee giant said Tuesday that it expects the impact of the pandemic to be even larger in its current quarter, and to continue to depress its business to a lesser extent later in the year. The Seattle-based company said it expects the virus's impact to be temporary and that its business will eventually recover. Starbucks has suspended guidance across its business for its fiscal year.

Starbucks said it was suspending share repurchases and reducing expenses it can postpone given the virus's impact on its business. The company will continue to pay quarterly dividends.

Starbucks has taken some of the strongest measures among restaurant companies to safeguard workers and customers in response to the virus. It was one of the first national chains to restrict dine-in service, eventually shifting nearly all of its sales to drive-through and delivery. It has paid workers at company-owned stores to quarantine and compensated employees who chose to stay home for 30 days rather than work.

Those measures have come at a cost. Starbucks said the pandemic cut its profit in the Americas by $450 million as it lost sales, spent on safety supplies and boosted wages for workers. Starbucks's earnings per share adjusted for unforeseen expenses, including the added worker pay, came to 32 cents a share. Analysts polled by FactSet had expected adjusted earnings of 34 cents a share.

"The financial impacts of Covid-19 are very material," Chief Financial Officer Patrick Grismer said.

The company's shares declined 1% to $78.

Roughly 50% of Starbucks's company-owned stores in the U.S. are closed. The others have continued with drive-through and delivery sales. Starbucks has said it won't open dine-in service at U.S. cafes soon, relying on drive-through, delivery and pickup sales for now. The chain plans to begin reopening closed stores with the modified service on May 4, with around 90% of its 8,870 company-owned locations running by early June. Starbucks has said it would continue to pay workers an extra $3 an hour through the end of May.

Starbucks said that checks at stores in the U.S. are growing as customers place group orders in drive-throughs.

"When you've had to be sheltering in place for several weeks, just to get out for a nice uplifting experience at Starbucks, it's familiar and it's rewarding," CEO Kevin Johnson said.

The company's China business has felt the virus's impact since January, with same-store sales declining 90% at the peak of the outbreak there, in mid-February. Nearly 100% of its stores in China are now running with limited hours and modified service. Starbucks said Tuesday that it will open a net-500 stores in China this fiscal year, and defer 100 openings originally planned.

The same-store sales decline put an end to 41 consecutive quarters of global growth for Starbucks. Starbucks's sales in stores open for at least 13 months last declined in 2009 during the recession.

The company reported earnings per share of 28 cents on $328 million in profit. Global sales for the second-quarter ending in March came to $6 billion, down 5% from the year before. Analysts had expected $5.9 billion in sales and an 8.5% drop in same-store sales.

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

(END) Dow Jones Newswires

April 28, 2020 18:34 ET (22:34 GMT)

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