Starbucks Pares 2018 Gains as Long-Game Mentality Irks Investors

(Bloomberg) -- After another quarter of tepid sales growth, Starbucks Corp. Chief Financial Officer Scott Maw assured investors that the company is investing “strategically and with a ‘long game' mentality.” Wall Street may not be so patient.

Starbucks grew just as much as analysts expected in the latest quarter, but investors sold shares Friday, sending the stock down as much as 2.8 percent to $57.71. Still associated with its meteoric rise to ubiquity, the company is having trouble managing expectations now that it's among the biggest restaurant chains in the world.

“The results aren't what people have in mind necessarily with Starbucks being a ‘growth stock,”' Bloomberg Intelligence analyst Jennifer Bartashus said. “Results were OK, just not great.”

The coffee giant met or beat analysts' forecasts on everything from adjusted profit to same-store sales.

The reaction from investors mirrored selloffs on positive quarterly results this week from U.S. companies such as Caterpillar Inc. and Twitter Inc., a sign that simply meeting expectations isn't enough in a market that's looking for reassurance that the economy will pick up speed this year.

For Starbucks, same-store sales increased 2 percent in the Americas region, while analysts estimated a gain of 1.8 percent, according to Consensus Metrix. Earnings excluding certain items amounted to 53 cents a share in the quarter, matching analysts' projections.

Revenue rose to $6.03 billion. Analysts had projected $5.93 billion.

Starbucks has seen sales growth slow recently, especially in its home market. Along with extra rewards, marketing emails and a branded Visa credit card, the chain is looking to new cold drinks to help its U.S. business, particularly in the slower afternoon period.

“We're going after the afternoon, which remains our softest day part,” Maw said in an interview. “People's routines have changed in terms of them being out and about as much.”

Starbucks is ramping up growth in China, and has said that market could be larger than the U.S. some day. But the company may face more competition abroad as Whitbread Plc spins off its Costa Coffee chain following pressure from activist investors. Costa has spread across the U.K., and is focused now on growth in China, where it plans to more than double its stores to 1,200 by 2022.

Comparable sales for Starbucks in China and Asia Pacific climbed 3 percent. Analysts estimated a gain of 2.6 percent. In Europe, the Middle East and Africa, they dropped 1 percent, trailing projections.

--With assistance from Brandon Kochkodin and Karen Lin

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net.

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Lisa Wolfson

©2018 Bloomberg L.P.