(Reuters) - Starbucks Corp shares fell more than 8 percent on Wednesday after a disappointing sales forecast from the U.S. coffee chain prompted Wall Street analysts to question the sustainability of its growth at home and in its next biggest market, China.
Several analysts downgraded their ratings and cut their 12-month targets on Starbucks' stock, after the company on Tuesday forecast sales growth at established restaurants of just 1 percent in the third quarter, below Wall Street's expectations of 3 percent.
Starbucks also said it expects no growth of same-store sales in China in the three months ending June.
"We've got to be much more disciplined in setting our priorities," Starbucks Chief Executive Kevin Johnson said in a Wednesday interview with CNBC.
"Clearly the performance we've delivered has not met my expectations ... It hasn't met our shareholder expectations."
With Wednesday's decline, Starbucks' shares were on track to enter negative territory for 2018 - a year in which co-founder Howard Schultz stepped down as executive chairman and the company found itself at the center of an embarrassing racial profiling incident.
Morgan Stanley analyst John Glass, who downgraded the stock to "equal-weight" from "overweight," expressed surprise at Starbucks' expectations for China, and said the overall forecast raised questions about the sustainability of Starbucks' growth back home. Just three quarters ago, same-restaurant sales in China had risen 8 percent, Glass said.
Other analysts echoed Glass' surprise, noting that the Seattle-based company had been upbeat about growth in China just a few weeks ago at its investor day event, saying it was highly focused on that market.
On Tuesday, Starbucks also announced plans to close some 150 U.S. cafes, triple the number it typically shuts in a year, and open many fewer locations in its 2019 fiscal year, beginning in October, a result of intensifying competition that has seen new coffee chains, convenience stores and fast-food chains improve quality and cut prices aggressively.
Analysts also pointed to lower-than-expected same-restaurant sales in five of the previous six quarters at Starbucks' Americas business, which is dominated by its roughly 8,000 U.S. cafes.
Some analysts said a sharper focus on digital initiatives - promoting Starbucks' mobile app and online ordering - could make up for some of the slowdown in the company's key markets.
"In reaction to what is now a clearer pattern of slower U.S. sales, more product and digital innovation is in the works, but it's hard to see how much that impacts sales," Morgan Stanley's Glass said.
Morgan Stanley's downgrade on Starbucks' shares brings the total number of "hold" or equivalent ratings on the stock to 15. Still, 16 analysts maintain a "buy" or higher rating.
The average Wall Street price target on Starbucks shares was $62.08. In late morning trade on Wednesday, the company's shares changed hands at $52.58, down 8.4 percent.
(Reporting by Nivedita Balu in Bengaluru; Additional reporting by Alana Wise; Editing by Sai Sachin Ravikumar ansd Steve Orlofsky)