Published: Thu, June 21, 2018
Arts&Culture | By Kristi Paul

Starbucks to close 150 stores amid slowing sales

Starbucks to close 150 stores amid slowing sales

The world's largest coffee chain has faced increasing competition from upscale coffee houses and fast-food chains like McDonald's Corp and Dunkin Donuts in recent years, missing analysts' estimates for same-store sales in the USA -dominated Americas region in five of the last six quarters.

"Our recent performance does not reflect the potential of our exceptional brand and is not acceptable", CEO Kevin Johnson said in a statement.

Stifel pulled its target price down slightly, to $55, just a bit above current levels.

"We have a line that we'd love to share with our customers later this year, so it is in our plans", she said.

Starbucks shares fell by as much as 7% on Wednesday after the company announced a third-quarter sales forecast that was weaker than analysts had expected.

The company closed 8,000 cafes on May 29 so 175,000 employees could undergo racial tolerance training.

Starbucks says it can attract more diners in the US with new menu items and will focus on its expanding tea business, as well as capitalizing on health and wellness trends.

Starbucks shares slipped almost 2 percent in after-hours trading.

"The company's streamlining initiatives will enable greater agility in adapting more quickly to changes in consumer preferences, " the company stated.

Historically, the Seattle-based company closes roughly 50 stores a year.

Johnson laid blame for the disappointing sales growth at the feet of the once-vaunted Frappuccino, which accounted for 14 percent of revenue at company-operated stores as recently as three years ago. Additionally, it plans to cut general and administrative costs, and has hired a consultant to help in this area.

Johnson said Starbucks has not reached saturation point in the USA, but it will be more strategic about where it puts new stores, focusing on underpenetrated markets in "Middle America".

The closing stores are often in "major metro areas where increases in wage and occupancy and other regulatory requirements" are making them unprofitable, Johnson said.

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