NEW YORK – Starbucks Corp., which has been addressing fallout over the arrest of two black men at one of its Philadelphia stores, reported sales growth Thursday that modestly exceeded Wall Street expectations during a period that preceded the outcry.
The company said sales grew 2 percent at established stores worldwide during the quarter that ended April 1, compared to the 1.8 percent growth analysts expected, according to FactSet. Its stock was down nearly 3 percent to $57.50 in after-hours trading.
The report comes as Seattle-based Starbucks company prepares to close down 8,000 U.S. stores on May 29 to conduct racial bias-awareness training for its employees. There was no immediate indication that Starbucks expected any long-term financial impact from the controversy, or from its plans to close down its company-owned U.S. stores for the training.
Starbucks kept its forecast of full-year earnings of between $2.48 per share and $2.53 per share.
On a conference call, CEO Kevin Johnson said Starbucks’ leadership team remains on the ground in Philadelphia to address the situation. He said that the closing of the stores on May 29 was only a “small piece” of the actions Starbucks planned in response to the episode.
“I am personally committed to act on several front to ensure it never happens again,” Johnson said.
The episode began when a Starbucks manager called police on April 12 to complain that the two men were refusing to buy anything or leave the store. The two men, Rashon Nelson and Donte Robinson, told The Associated Press that they were waiting for a business contact to arrive. The businessman, Andrew Yaffe, showed up as the two men were being handcuffed and could be seen in the video demanding an explanation for the officers’ actions.
That prompted calls for a boycott on social media, was blow to the progressive and inclusive image that Starbucks has projected. Starbucks has also long cast its stores as welcoming meeting places for friends and associates outside the home and workplace.
Johnson moved swiftly to get ahead of the outcry. He denounced the arrest and traveled to the city to meet personally with the two men. In addition to the May 29 event, the company has promised to incorporate unconscious bias training into the instruction process for all newly hired employees.
Starbucks has been trying to accelerate sales growth in the U.S. The coffee shop chain has been tinkering with its food offerings in an effort to increase sales at lunchtime, and has focused on streamlining its business, like the recent sale of its Tazo tea brand. It also recently opened its Mobile Order and Pay service to anyone using the Starbucks app, a service previously available only to Starbucks Rewards customers.
CFO Scott Maw and COO Roz Brewer said sales to non-rewards customers had increased for the first time in several quarters, though exact figures were not available. They said that Starbucks has largely resolved problems that mobile orders had created at some pick-up counters, and the sales have jumped at the stores were the congestion was the worst.
The Seattle-based company reported profits that met Wall Street expectations. Net income was $660.1 million during the quarter, or 47 cents per share. Adjusted for one-time gains and costs, earnings came to 53 cents per share, which was the same as expectations, according to Zacks Investment Research.
The coffee chain posted revenue of $6.03 billion in the period, exceeding Street forecasts. Ten analysts surveyed by Zacks expected $5.9 billion. Sales showed zero growth in the Americas during the quarter, though customers spent an average of 3 percent with each transaction. Customer traffic was also flat in Asia, where China is the company’s fastest growing market.
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