The novel coronavirus pandemic will cause a loss in the fiscal third quarter, expects the international coffee chain Starbucks. The company predicted a a loss of as much as $3.2 billion in revenue because of the coronavirus pandemic.
The company had already withdrawn its forecast for 2020 in April and is now expecting a net loss per share of 64 cents to 79 cents and adjusted losses per share of 55 cents to 70 cents for quarter ending June 28. But the company expressed confidence of an improvement in its fiscal fourth-quarter earnings and forecast a net income per share of 11 cents to 36 cents and adjusted earnings per share of 15 cents to 40 cents.
The company expects weekly cash flow to be positive by the end of June, Starbucks said. .
The company also forecast a grim picture for same-store sales growth. The company expects a decline of between 10% and 20% in same-store sales in its two largest markets — the United States and China, for the full fiscal year. By the end of the fourth quarter, the company predicted flat same-store sales growth in China while negative same-store sales growth in the US>
“With each passing week, we are seeing clear evidence of business recovery, with sequential improvements in comparable store sales performance,” CEO Kevin Johnson and CFO Pat Grismer wrote in a letter to stakeholders. “The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us.”
In May, there was a drop of 43% in US same-store sales with the company reopening many of its stores in the country but with social distancing and modified hours and changed operations because of the Cvodi-1`9 situation. The company said that 91% of US stores had been reopened by the end of the month. The same-store sales were down 32% as of the last week of May.
In May, there was a drop of 21% in same-store sales in China which was better than the situation in April when there was a decline of 32% in same-store sales. Same-store sales were lower by just 14% compared to the same period a year earlier as of the last week of May in the Chinese market.
The company has also started to open new stores in the US. Not the company expects to open about 300 new stores in the country for the entire 2020 compared ot its previously announced target of 600 new stores.
As a part of its plan to accelerate changes to its US stores, over the next 18 months, Starbucks will also be shutting down as many as 400 company-owned cafes in the country. The plan of the company to adjust to the trend of more customers placing online orders through Starbucks’ app was spread over the next three to five years. However that plan has been accelerated by the novel coronavirus pandemic.
(Adapted from CNBC.com)