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Starbucks closes more than half of its China stores amid coronavirus

Julia La Roche
Correspondent

Starbucks (SBUX) said on Tuesday that it temporarily closed more than half of its China stores, amid growing concerns surrounding the coronavirus outbreak that has killed more than 100 in the world’s second-largest economy.

In announcing first quarter sales that topped Wall Street’s expectations, the coffee giant said that the virus’ spread forced it to shutter more than half of its 4,100 stores in its second-largest market — the impact of which is expected to show up next quarter.

China is Starbucks’ second-largest market, but also its fastest growing. The company plans to “monitor and modify the operating hours” in other stores, as the disease’s toll continues to mount, and more cases are discovered worldwide.

“As events unfold, we will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results,” CEO Kevin Johnson said in a statement.

“We remain optimistic and committed to the long-term opportunity in China, building on our brand heritage and 20-year legacy of profitable growth,” he added.

China’s coronavirus outbreak, which originated in Wuhan and continues to upend travel and worldwide markets, has now been reported in more than a dozen locations, and the numbers of those affected have risen.

Both Hong Kong and Russia announced strict travel measures from mainland China, with the U.S. government expanding screening measures at key airports, and at least one major air carrier pulling back on travel to the world’s second-largest economy.

Earnings beat the Street

Fuzhou, Fujian, China, June 30, 2019, the Starbucks Cafe in the old tourist neighborhood. This is the famous tourist attraction of NanHou Street, Sanfangqixiang, Fuzhou.

Nevertheless, it was a good quarter for Starbucks, which delivered stronger-than-expected results during the closing months of 2019. It reported adjusted earnings per share of 79 cents, surpassing expectations of 77 cents, on revenue of $7.1 billion, which was in-line with forecasts.

The closely-followed same-store sales number came in at 5% globally. In the U.S., Starbucks posted same-stores sales growth of 6%, while its China operations delivered 3% comp growth.

During the first quarter, Starbucks’ revenues in China jumped 15% year-over-year, driven by new store growth and the 3% comp store sales growth.

Starbucks also saw a surge in mobile orders in China, which accounted for 15% of total revenue there, up from 10% in the prior quarter. What’s more, 9% of the China revenue came from delivery and 6% from mobile order and pickup.

More Chinese consumers are joining Starbucks Rewards, with 90-day active members hitting 10.2 million during the quarter, up 40% from a year ago when the program relaunched.

Shares fell about 1% in the after-hours session.


Julia La Roche is a Correspondent at Yahoo Finance. Follow her on 
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