Starbucks finished the last three months of 2019 with better-than-expected net sales and profits, the coffee giant reported on Tuesday. But an outbreak of a deadly coronavirus in central China and growing fear across the country of getting sick are casting a dark cloud over Starbucks’ bottom line in 2020.
Over the past week of the Chinese New Year holiday, normally the busiest time of the year for retailers and restaurants in China, Starbucks has temporarily closed more than half of its stores in the country amid concerns of the rapidly spreading coronavirus, which has killed more than 100 people in China. At the remaining stores, business was painfully slow, as most Chinese people opted to stay inside to reduce the risk of being infected.
Not knowing how long the pandemic may last, Starbucks warned investors that the coronavirus crisis could have a “material impact” on the company’s financial performance this year.
“As we begin our fiscal second quarter, I want to acknowledge the dynamic situation our partners in China are navigating as health officials respond to the coronavirus,” CEO Kevin Johnson said on Tuesday. “As events unfold, we will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results.”
Starbucks operates 4,100 stores across China. About 90 of them are in Wuhan, where cases of the new coronavirus erupted in late December.
“We remain optimistic and committed to the long-term opportunity in China, building on our brand heritage and 20-year legacy of profitable growth,” Johnson said.
For the first fiscal quarter, which ended December 29, Starbucks posted a revenue of $7.1 billion, in line with Wall Street forecasts, and an adjusted earnings per share of 79 cents, topping expectations of 77 cents. Same-store sales, a critical measure for restaurant chains, grew 5% year-over-year, better than the expected 4.4%.
For fiscal year 2020, the coffee chain reaffirmed its revenue and profit forecast. Excluding the impact of coronavirus, Starbucks expects to grow revenue by 6% to 8% and global same-store sales by 3% to 4%.
“The company will update its guidance for fiscal 2020 when we can reasonably estimate the impact of the coronavirus,” Starbucks said in Tuesday’s earnings release.