Starbucks blames Paris attacks for hurting European sales

Pedestrians walking past a Starbucks outlet in New York on Jan 17.
Pedestrians walking past a Starbucks outlet in New York on Jan 17. PHOTO: BLOOMBERG

CHICAGO (BLOOMBERG) - Starbucks' second-quarter profit forecast missed analysts' estimates following a sales-growth slowdown overseas, which the company blamed in part on the Paris terrorist attacks.

Though sales in Starbucks' home region increased faster than expected last quarter, the pace slackened in Asia and Europe, according to a statement on Thursday (Jan 21). The Seattle-based coffee chain is confronting an increasingly shaky global economy, which may make it hard to maintain one of the restaurant industry's best stock rallies. Starbucks' shares climbed 46 per cent last year, the seventh straight year of gains.

There was a "dramatic decline" in consumer and tourist activity in western Europe following the November attacks in Paris, chief operating officer Kevin Johnson said in an interview. "That had some impact," he said.

Terrorists killed 130 people in and around Paris, striking cafes, the Bataclan concert hall and a stadium. Starbucks, the world's biggest coffee-shop chain, also was hit by an attack in Jakarta earlier this month, prompting it to temporarily close about 50 locations. One of its stores suffered collateral damage from an explosion, and a security guard and four customers were injured.

Starbucks' same-store sales rose just 1 per cent in Europe, the Middle East and Africa during the first quarter, compared with an estimated rise of 4.5 per cent.

They climbed 5 per cent on that basis in China and the Asia-Pacific region, missing the 6.1 per cent predicted by analysts.

Starbucks forecast second-quarter earnings of 38 US cents to 39 cents, excluding some items. Analysts had estimated 40 cents.

Still, its first-quarter earnings of 46 cents a share topped the 45 cents that analysts projected.

The stock dropped as much as 4.9 per cent to US$56.11 after the results were posted.

In its home market, Starbucks' popular mobile-phone app and its rewards programme helped bolster results in the first quarter, which ended Dec 27. Same-store sales gained 9 per cent in the Americas region, beating the 7.7 per cent estimate tracked by Consensus Metrix.

Total revenue rose 12 per to US$5.37 billion in the first quarter, short of the US$5.39 billion projected by analysts.

Investors have sky-high expectations for Starbucks, making it especially tough when the company falls short, said Peter Saleh, an analyst at BTIG.

"This is an extremely, extremely expensive stock," he said. "It's basically priced for perfection. When things are not perfect, it will trade down a little bit."