Starbucks guides for wider-than-expected fiscal Q3 losses, resumes new store openings around the world

Starbucks Corp. said Wednesday that it expects losses in the fiscal third-quarter, but has seen sales improvements around the world as cities open up, forecasting a full-year profit.

The coffee company is guiding for fiscal third-quarter net losses per share of 64 cents to 79 cents, and adjusted losses of 55 cents to 70 cents per share. The FactSet consensus is for a loss of 16 cents per share.

Sales are expected to fall as a result of the COVID-19 pandemic by $3.0 billion to $3.2 billion from a year ago. The FactSet consensus is for sales of $4.44 billion, down from $6.82 billion last year.

Starbucks SBUX, -3.71% says its business results will see a greater impact from the coronavirus pandemic in the third quarter versus the second as the company was affected for a longer duration during Q3 in markets outside of China.

The company forecasts continued improvement through the fiscal fourth-quarter, guiding for net EPS ranging from 11 cents to 36 cents, and adjusted EPS of 15 cents to 40 cents. The FactSet forecast is for EPS of 38 cents.

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Full-year net EPS is expected to be 33 cents to 73 cents, and the coffee company is guiding for adjusted EPS of 55 cents to 95 cents. The FactSet consensus is for $1.36.

The guidance sent Starbucks shares down 2.3% in Wednesday premarket trading. The stock had lost 1.4% on Tuesday, after closing Monday at the highest price since Feb. 24.

Due to liquidity measures, including drawing down $500 million from its long-term facility in May, Starbucks expects an increased interest expense in the range of $435 million and $445 million in fiscal 2020, up from approximately $330 million in fiscal 2019.

In China, same-store sales fell 14% for the last week of May, showing continued improvement, after falling 32% in April. Starbucks resumed opening new stores in China at the end of March, with 57 new locations opening their doors in April and May.

In the U.S., 91% of stores were open by the end of May, though many were limited to takeaway orders and had reduced hours.

Same-store sales were down 32% the last week of May, also showing continued improvement, after dropping 63% in April. Sales have overwhelmingly come through the drive-through window and mobile-order-and-pay function, the company said.

Starbucks now expects to open 300 net new stores in the U.S. in fiscal 2020, down from 600 originally. The company will close up to 400 stores as part of a repositioning in the U.S. that will include a new store format designed for “on-the-go” urban markets. They’ll be located near traditional cafes that include seating, to reduce crowding.

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These new Starbucks PickUp locations have been tested in New York City and Toronto and are designed for mobile orders. Before the coronavirus pandemic, about 80% of transactions at U.S. company-owned stores were takeaway.

This new store program is expected to yield net store growth in fiscal 2021, but also have a “moderately negative” impact on revenue in the Americas.

Starbucks gave the business update ahead of a Stifel virtual conference taking place on Wednesday. The company is scheduled to report fiscal third-quarter results on July 28.

Starbucks stock has fallen 6.3% for the year to date while the S&P 500 index SPX, +0.01% is down 0.7% for the period.

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