Starbucks takes $3.2 billion loss during coronavirus pandemic
Starbucks is expected to suffer a loss in the third fiscal quarter, losing $ 3.2 billion as a result of the coronavirus pandemic.
The company’s shares fell more than 3% in early trading on Wednesday. Shares, which have a market value of $ 92.6 billion, are down 10% this year.
Starbucks, which dropped its previous forecast in April, projects a net loss per share of 64 to 79 cents and an adjusted loss per share of 55 to 70 cents for the quarter ending June 28. The company expects financial profit for the fourth quarter to improve, projecting EPS of 11 to 36 cents and adjusted earnings per share of 15 to 40 cents..
Starbucks expects weekly cash flow to be positive by the end of June.
The forecast for sales growth per store looks bleaker. Throughout the fiscal year, the company expects single-point sales in its two largest markets, the US and China, to decline by 10-20%. Starbucks predicts strong sales growth at one Chinese outlet by the end of the fourth fiscal quarter. Sales at one US outlet are forecast to be negative.
«With each passing week, we see clear evidence of business recovery with consistent improvement in comparable POS sales, ” wrote the CEO Kevin Johnson and CFO Pat Grismer in a letter to interested parties. – The Starbucks brand is resilient, deeply connected with customers, and we believe that the most difficult period is behind us.».
Single-point US sales fell 43% in May as the company opened new points of sale with revised opening hours. By the end of the month, 91% of US points of sale were reopened. Local sales drop 32% in last week of May.
In China, sales fell 21% in May, and sales in locations fell 32% in April. In the last week of May, sales of one outlet fell by only 14% compared to the same period a year earlier..
About 90% of Chinese cafes have returned to their pre-pandemic modes of operation, and 70% have empty seats. Starbucks opened 57 new chain cafes in China in April and May.
The opening of new locations in America has also resumed. Starbucks now plans to open nearly 300 new locations in fiscal 2020, up from a previous estimate of 600 outlets.
The company also plans to close up to 400 company-owned cafes over the next 18 months as part of its plan to accelerate changes in the mechanics of retail. As more customers placed orders through the Starbucks app, the company planned to modify its cafes over the next three to five years, but the pandemic has accelerated the process..
Starbucks plans to add more mobile outlets in dense urban markets such as New York, Chicago and San Francisco. The network opened its first mobile outlet in November in Penn Plaza, Manhattan. Suburban cafes will be equipped with wide-opening windows, sidewalk shipping for mobile orders, and double car lanes.
The coffee chain will also add a separate counter for mobile customer orders and delivery services in busy locations..
Starbucks said it had amended its fixed payment coverage agreement under the $ 3 billion revolving credit facility agreement during the fourth quarter of fiscal 2021. As of Wednesday, the company has not yet used any of these lines of credit..