Starbucks lowers profit forecast, speeds closures of poorly performing stores

Starbucks Announces Major Store Closings Coming in 2019

Last month, Starbucks closed about 8,000 cafes so its employees could undergo racial-bias training, which did hurt sales in the quarter, Johnson said. Starbucks will borrow to finance the buybacks, Maw said.

Starbucks Corp (SBUX.O) shares fell more than 8 percent on Wednesday after a disappointing sales forecast from the USA coffee chain prompted Wall Street analysts to question the sustainability of its growth at home and in its next biggest market, China.

Starbucks cut its earnings outlook and plans to close more under-performing stores as part of a multi-pronged response to what chief executive Kevin Johnson called an unacceptable level of same-store sales growth Tuesday. Analysts had expected same-store sales to grow 3% in that period. "We must move faster to address the more rapidly changing preferences and needs of our customers".

The former Chairman Howard Schultz stepped down earlier in June.

'It seems fairly clear that the low-hanging fruit on causing everybody to get addicted to their (Starbucks) fantastic products is kind of in the rear-view mirror, ' said Tony Scherrer, director of research at Smead Capital Management.

It might feel like there's a Starbucks on every corner in America, but next year, there will be fewer stores on fewer corners-150 fewer, to be exact.

'At least in the Starbucks heavy markets, the people that are going to drink coffee are already drinking it'.

The Seattle-based company said it would close underperforming stores in "densely penetrated markets" and slow its rate of store growth.

"While certain demand headwinds are transitory, and some of our cost increases are appropriate investments for the future, our recent performance does not reflect the potential of our exceptional brand and is not acceptable", Starbucks CEO and President Kevin Johnson said in a statement.

Johnson said Starbucks has not reached saturation point in the US, but it will be more strategic about where it puts new stores, focusing on underpenetrated markets in "Middle America". That's their lowest quarterly growth since 2009, Bloomberg.com reported.

In May, Starbucks revealed it's selling Nestlé the rights to market, sell and distribute its packaged coffee and tea globally for more than $7 billion.

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