Coffee Giant Starbucks Struggling Amidst Global Slowdown in Coffee Sales


On Thursday, the coffee chain reported that global comparable sales grew 2% in the first quarter, but transactions were flat.

Sales at established Americas region cafes in the quarter to December 31 were up just 2 percent, falling short of Street estimates of a 3.3 percent rise.

But US cafe sales growth has cooled as Starbucks continues to add stores, while competition mounts from both high-end and low-cost coffee sellers.

Scott Maw, the CFO of Starbucks Corporation, said "we are laser-focused on accelerating growth in China and driving improvement across the USA business as we move back into and through the back half of the year, and remain committed to delivering in the long-term targets we announced last quarter". Analysts polled by research firm Consensus Metrix expected a sales rise of 3.3 per cent.

Starbucks offers holiday-themed drinks such as the Chestnut Praline Latte and Gingerbread Latte as well as gift cards, mugs, coffee and tea gift boxes and teddy bears to woo holiday shoppers.

Johnson blamed the disappointing sales at same-stores during the quarter on a shift towards shopping online from traditional brick and mortar locations, and the waning customer interest in afternoon as well as evening hours.

The beverage company said same-store sales fell short in the company's regions at the end of 2017, except in China - where sales rose 6 percent.

Company's chief financial officer Scott Maw said Starbucks would continue to "streamline" its operations by removing underperforming and lower-margin merchandise from store lobbies and exiting businesses that don't meaningfully contribute to sales and profits - as Starbucks is doing by closing its Teavana retail stores and selling its Tazo tea brand.

The performance of same-store sales and it outlook helped to overshadow the boost in profit Starbucks is expecting to reap from a corporate tax overhaul in the U.S. Still, the US corporate tax cut ushered in by the Trump administration could well soften the blow of slow growth for Starbucks.

While Starbucks expanded its holiday gift items this year to include tech gadgets and small games, sales of those products were weak, he said. The coffee chain's new Reserve Roastery in Shanghai in particular was a smashing success.



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