More than Half of Starbucks Chinese Stores Closed

Hülya Karahan: Production Editor

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The company said that the outbreak of the Chinese coronavirus is likely to impact this year’s profits and shock investors. The stock price closed lower.

Starbucks said more than half of its stores in China have been closed due to the deadly virus.

Starbucks reported a first-quarter profit of $ 886 million, or 74 cents per share, up from $ 761 million and 61 cents per share in the same period last year. After adjusting for one-time items, earnings per share were 79 cents, up from 75 cents a year ago.

Revenue rose 7% to $ 7.1 billion, better than the $ 6.6 billion in the same period last year. Same-store sales worldwide increased by 5%.

Chief executive Kevin Johnson vowed in an earnings statement that he would “confess to all shareholders” China’s “special circumstances.”

Kevin Johnson said, “We have closed more than half of China’s stores and continue to monitor and modify the opening hours of all stores in the market in response to a corona virus outbreak. This is expected to be a temporary measure.

He noted, “Given the changing epidemic situation, it is currently not possible to reasonably estimate the duration of business disruption, reduced foot traffic, and related financial impacts, but it is expected to have a combined effect on our international business and Q2 and full year 2020 Significant impact.”

The statement states that as long as Starbucks “can reasonably assess the impact of the coronavirus”, it will update its outlook for FY2020.

Starbucks China said that for 21 years of deep cultivation of the Chinese market, we are full of confidence in China’s long-term development.

According to the latest financial data of Starbucks,  has 4,292 stores in more than 160 cities in China. This also means that more than 2,000 Starbucks stores across the country were temporarily closed due to the epidemic.

It is reported that for the stores that are still open, Starbucks China has adopted hourly in-store disinfection, equipped with no-disinfectant hand sanitizer, measuring the temperature of consumers before entering the store, measuring the temperature of employees before taking the job, wearing gloves for disinfection, and leaving the customer on the desktop A series of initiatives such as disinfection.

On January 25, Starbucks China announced that all Starbucks stores and special star delivery in Hubei Province will be closed for the sake of the health and safety of partners (employees) and customers.

In addition, Starbucks China has confirmed a donation of RMB 3 million to the China Red Cross Foundation to purchase protective clothing, masks, disinfection and sterilization supplies and other medical supplies required by medical personnel in the affected areas in Hubei Province, especially Wuhan. Starbucks China Chairman and CEO Wang Jingying issued an internal letter on January 25 stating that “I firmly believe that difficulties will always pass and the epidemic will be repelled at an early date. We will spend this extraordinary period together.”

On January 29, Starbucks released its first quarter financial results for fiscal 2020. In the first quarter, Starbucks revenue was US $ 7.1 billion, an increase of 7% year-on-year (compared with the same period last year), basically in line with expectations; adjusted EPS of 79 cents, same-store sales increased by 6%, which were better than market expectations. Among them, China’s Q1 revenue was US $ 745 million, an increase of 13% year-on-year; the number of stores was 4,292, an increase of 16% year-on-year.

Starbucks pointed out in its financial report that due to the impact of the Chinese epidemic and the user’s willingness to avoid going out, the company has temporarily closed more than half of its stores in China. The time and number of reopening will depend on the situation.

“The severity of the impact depends on the time the store is closed, and we are working with relevant departments to respond to the situation and protect our employees and customers,” said Pat Grismer, Starbucks Chief Financial Officer.

Reviewer overview

More than Half of Starbucks Chinese Stores Closed - /10

Summary

The company said that the outbreak of the Chinese coronavirus is likely to impact this year's profits and shock investors. The stock price closed lower.

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