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Cafe sales growth bleak

Saturday, January 27, 2018

STARBUCKS Corp on Thursday warned that 2018 global cafe sales growth would be at the low end of its forecast, after holiday drinks fell flat with US customers during what is traditionally its blockbuster quarter.

Shares of the world's largest coffee chain slid 5.2 per cent following the announcement to $US57.30 ($F114), after closing at $US60.55 ($F121) in regular trade.

Sales at established Americas region cafes in the quarter to December 31 were up just 2 per cent, with visits unchanged from a year ago. Analysts polled by research firm Consensus Metrix expected a sales rise of 3.3 per cent.

"Holiday (limited-time offers) and merchandise did not resonate with our customers as planned," Chief Executive Kevin Johnson said on a conference call with analysts.

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.

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

The chain is also working to eliminate bottlenecks that can happen when users of its industry-leading mobile app flood crowded cafes with orders. Starbucks said it now expects 2018 global same-store sales growth at the low end of its previously-issued view of 3 to 5 per cent. However, it raised its fiscal 2018 earnings forecast to a range of $2.48 to $2.53 per share, excluding items, up from $2.30 to $2.33 per share previously, thanks to a US corporate tax cut.

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