Starbucks (SBUX) Trims Guidance Due To Coronavirus Outbreak

By Zacks Investment ResearchStock MarketsMar 05, 2020 09:42PM ET

www.investing.com/analysis/starbucks-sbux-trims-guidance-due-to-coronavirus-outbreak-200514031

Starbucks (SBUX) Trims Guidance Due To Coronavirus Outbreak

By Zacks Investment Research | Mar 05, 2020 09:42PM ET

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Starbucks Corporation’s (NASDAQ:SBUX) China business is reeling under the impact of the coronavirus outbreak. However, the company stated that the pandemic disease hasn’t impacted its U.S. business.

Starbucks had closed nearly 80% of its stores in China in early February due to Lunar New Year holiday and the coronavirus outbreak. However, the company announced that it has reopened 90% of the closed stores. Nevertheless, the stores are “operating under elevated safety protocols.”

These store closures have resulted in decline in comparable store sales. In February, Starbucks China’s comparable store sales plunged 78%, year over year, primarily on account of store closures, reduced operating hours and customer traffic. In the second week of February, the company witnessed steepest decline in comparable store sales in China.

The company now expects comparable store sales in China to be down nearly 50% in second-quarter fiscal 2020 compared with the prior estimate of growth of approximately 3%. Consequently, the company anticipates the company’s China revenues to be impacted by $400 million to $430 million due to the coronavirus outbreak. Moreover, the company’s GAAP and non-GAAP earnings per share for the second quarter is likely to be impacted in the range of 15 to 18 cents due to the deadly virus.

Shares of Starbucks have decreased 11.8% in the past month, compared with the industry’s decline of 9.6%.

Global Impact of Coronavirus on Starbucks

Apart from China, the deadly virus has spread to countries including the United States, Italy, South Korea, India, Israel, Saudi Arabia, Sweden, France, Denmark and Japan. In fact, cases of coronavirus have been reported across 75 countries and territories.

Per management, its operations in Japan, South Korea and Italy have also been impacted by store closures and dismal traffic. However, the company is unable to estimate the impact of the coronavirus outbreak in these markets as it is in early stage.

Other major restaurant companies like Yum China Holdings, Inc. (NYSE:YUMC) , Papa John's International, Inc. (NASDAQ:PZZA) and McDonald's Corporation (NYSE:MCD) have also shutdown majority of their restaurants in China.

Starbucks currently carries a Zacks rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Starbucks (SBUX) Trims Guidance Due To Coronavirus Outbreak

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