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Starbucks To Close 400 US Stores As It Restructures Business, Expects $2.2B Decline In Q3

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Starbucks To Close 400 US Stores As It Restructures Business, Expects $2.2B Decline In Q3

Starbucks Corporation (NASDAQ: SBUX) on Wednesday shared its forecast for the third quarter of its financial year in a filing with the Securities and Exchange Commission.

Q3 Forecast

The coffee chain giant said it expects Q3 total revenue to drop between $3-$3.2 billion due to the impact of the novel coronavirus (COVID-19).

The operating income is expected to decline between $2 billion and $2.2 billion, it noted.

Starbucks estimates non-GAAP earnings per share to be between 55 and 70 cents.
"Our operating margins have shown gradual improvement in May, and we expect our comparable store sales and the rate of flow-through on lost sales to continue to improve in June and thereafter, progressively alleviating the negative EPS impact throughout Q4," the Seattle-based company said in the filing.

Similar-Store Sales Improved In May

According to Starbucks, similar-store sales improved in May over the previous month in both the United States and China, two of its key markets, as COVID-19-related lockdowns were eased.

In the U.S., it said similar-store sales were down 43% year-on-year, compared to the 63% in April. In China, similar-store sales were down 21% YoY, compared to April's 32% decline.

Restructuring The Business Model

The coffee chain said it would shut down 400 of its existing stores in the U.S. over the course of 18 months.

Starbucks noted the move is due to a change in consumer behavior, as demand has shifted more towards drive-thru and deliveries, especially in urban areas.
"We were already thinking about what does that future state look like in those metro areas?" a Starbucks spokesperson told CNN. "COVID-19 has actually allowed us to accelerate the plans we already had on the books."

The company said it was planning to open 300 new drive-thru and delivery stores across the U.S. by the end of the financial year, down from its earlier plan of opening 600 stores.

Starbucks Price Action

Starbucks shares closed nearly 4.1% lower at $79.01 on Wednesday. The shares dropped another 0.65% in the after-hours session at $78.50.

 

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