Starbucks shares tumble

NEW YORK (REUTERS) - Starbucks' stock plunged out of the gate on Friday (July 28) following the company's earnings that came out after the bell on Thursday.

Investors' main concern - a slowdown in Starbucks' membership growth.

Starbucks changed its rewards programme last year. It used to give points for every purchase. Now it's for every dollar spent at its cafes. The shift put customers who buy cheaper items at a disadvantage.

Starbucks also lowered its current-quarter earnings forecast and said it would close all 379 of its Teavana stores.

The coffee chain bought Teavana for US$620 million five years ago hoping to capitalise on the US$90 billion (S$122 billion) tea market.

Technomics' David Henkes:

"Starbucks grew about 5 per cent same-store sales this year, which, certainly, when you compare it to the broader industry, Starbucks continues to do well," said Technomics' David Henkes. "When you compare to overall industry same-store sale, which are up somewhere between 1.5 - 2 per cent if you average out what the other chains are reporting, you know, Starbucks continues to execute well and do a great job.

"I know some analysts who were expecting some higher numbers, but, certainly, relative to what we're seeing in the industry, these are some pretty good results and Starbucks continues to outperform the broader industry."

Even though Starbucks' profit met Wall Street expectations, the company is battling competition from meal kit sellers and convenience stores.