Starbucks Stock Drops Following Miss on Profit

Starbucks Corp forecast earnings for the current quarter that were below estimates on Wall Street as well as reporting slower growth across Asia than many hoped, sending shares down close to 4% in Thursday extended trading despite the coffeehouse chain having strong holiday sales.

Investor expectations usually are very high for Starbucks after over a 46% run-up in stock during 2015, and the coffeehouse has bet heavily on expansion in China, despite signs of growth cooling in the world’s second largest economy.

The company’s stock slipped in trading afterhours by $2.68.

Global sales for locations opened a minimum of 13 months increased 8% during the fiscal first quarter, while the metric increased 9% in its division of the America, which is its largest.

Both beat estimates of analysts easily.

However, sales across Europe were hit due to a drop in the number of tourists following the attacks in Paris during November and a strong U.S. dollar, which also hurt its sales in the region of Asia/Pacific, said Kevin Johnson the COO on during an earnings conversation.

Sales at its cafes in the Asia/Pacific region that were opened a minimum of 13 months increased by 5% during the quarter that ended on December 27, which the 6.1% increased that analysts had expected.

Operating margins were down 240 basis points ending at 19.4% for that region, primarily because of the impact of the business taking complete ownership during the quarter of Starbucks Japan.

The new order and pay technology at Starbucks for mobile handsets had increased sales as well as profit during recent quarters.

This technology has the potential of luring in the customers who might have shied away due to long waiting in line.

Sales in the U.S. were helped by tweaks in the menu, which saw new drinks added that were more expensive and an enhanced range of breakfast food items, said Starbucks officials.

Net revenue was up 11.9% to end the quarter at $5.39 billion. Net income that was attributable to Starbucks was down 30% to end the quarter at $687.5 million equal to 46 cents a share.

 

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