Starbucks Corp.’s shares dropped 3.2% in extended trading after its third quarter earnings missed the estimates of Wall Street analysts. This was mainly due to the impact of the pandemic continuation, which lowered store traffic and sales growth.
The coffee chain reported adjusted earnings of 78 cents per share, below the 84 cents per share expected by analysts. The net income rose to $1.15 billion, or 97 cents per share, up from $315.2 million, or 26 cents per share, in the same quarter last year. Sales rose 73% from the same period last year to $7.5 billion, but it still fell short of analysts’ estimates of $7.68 billion.
Starbucks also announced that it is experiencing supply chain problems because of the Covid-19 resurgence. The company is struggling with staff shortages and rise in costs, and has started to reduce the working hours of some retail staff, which could impact the company’s service levels.
Moreover, Starbucks is also facing challenges in key international markets, including China. The company reported less-than-expected China same-store sales growth, which rose 19%, missing the projected rate of 27% growth. As per analysts, competition in China is tough with local rivals like Luckin Coffee and HeyTea expanding their stores, which could severely dent Starbucks’ market share.
However, Starbucks boosted its full-year earnings forecast despite the current challenges. The company now expects adjusted earnings per share in the range of $3.20 to $3.25, up from the prior forecast of $2.90 to $3.00. For the fiscal fourth quarter, Starbucks expects to earn between 88 cents and 93 cents per share, notably lower than current analysts’ expectations of $1.01 per share.
