Starbucks says it lost $3 billion in revenue in latest quarter due to coronavirus pandemic

Earnings

A Starbucks employee wipes the protective screen as the coffe shop chain operates take away service in Battersea, south-west London on 21 May, 2020 in London, England.

Wiktor Szymanowicz | NurPhoto | Getty Images

Starbucks expects to swing to a loss in its fiscal third quarter as the company predicts it lost as much as $3.2 billion in revenue due to the coronavirus pandemic.

Shares of the company fell 2% in premarket trading. The stock, which has a market value of $94.2 billion, has fallen 8% so far this year.

Starbucks, which withdrew its prior outlook in April, is forecasting a net loss per share of 64 cents to 79 cents and adjusted losses per share of 55 cents to 70 cents for quarter ended June 28. But it expects that its fiscal fourth-quarter earnings will improve, predicting net income per share of 11 cents to 36 cents and adjusted earnings per share of 15 cents to 40 cents. 

For the full fiscal year, the company expects same-store sales in the U.S. and China to decline 10% to 20%. It is forecasting flat same-store sales growth in China by the end of the fourth quarter, but U.S. same-store sales are predicted to remain negative.

U.S. same-store sales fell 43% in May as the company reopened locations with modified hours and operations. By the end of the month, 91% of U.S. stores had been reopened. In the last week of May, same-store sales tumbled just 32%. 

About 95% of U.S. locations are open again, as of Tuesday, with the majority of closed locations located in the New York City area.

In China, same-store sales fell 21% in May, an improvement of April’s same-store sales declines of 32%. In the last week of May, same-store sales were down just 14% compared to the year-ago period. About 90% of Chinese cafes are back to their pre-pandemic operating hours, and 70% have full seating available.

In April and May, Starbucks opened 57 net new stores in China.

The company said that it amended its fixed charge coverage ratio covenant of its credit agreement for $3 billion of revolving lines of credit through the fourth quarter of fiscal 2021. As of Tuesday, it has not tapped any of those lines of credit. Starbucks expects weekly cash flow to be positive by the end of June. 

The company also shared more detail on Tuesday about its plans to accelerate changes to its U.S. stores. As more customers order through Starbucks’ app, the Seattle-based company had planned to make some changes to its cafes over the next three to five years. But the coronavirus pandemic moved up that timeline to the next 18 months. 

Starbucks plans to add more pick-up stores in dense urban markets, like New York City, Chicago and San Francisco. The chain opened its first mobile pick-up location in November in Manhattan’s Penn Plaza. Suburban-area cafes will get walk-up windows, curbside pick-up for mobile orders and double drive-thru lanes. 

The coffee chain also plans to renovate some cafe layouts by adding a separate counter for mobile order pick-up from customers and delivery couriers at busy locations.

This is a breaking news story. Please check back for updates.

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