Starbucks Expects 46 Pct Q2 Earnings Drop Amid Pandemic

Starbucks is withdrawing its 2020 outlook as it faces an estimated 46 percent earnings drop for the second quarter, according to multiple reports.

In an open stakeholder letter from Kevin Johnson, chief executive officer of Starbucks, and Pat Grismer, chief financial officer, the company provided an update on how COVID-19 has impacted business. 

“Given the dynamic nature of the COVID-19 crisis and how it is affecting our business globally, we are currently unable to estimate the full financial impacts beyond Q2 with reasonable accuracy,” the letter indicated.

Starbucks stock was down 2.2 percent to $70 in aftermarket trading Wednesday (April 8). U.S. sales first started dropping on March 12 and got worse when indoor seating areas were closed and people could only be served using drive-through or delivery. In the last week of March, same-store sales dropped 60-70 percent. 

“We are navigating this dynamic situation while staying true to the mission and values of Starbucks, including transparency. This includes sharing preliminary financial results in this communication, ahead of our Q2 earnings report on April 28,” the letter said, adding that setbacks are temporary and “we will overcome these challenges together.” 

Starbucks anticipates the disruption to its Chinese business — its second-largest market — during the pandemic affected Q2 earnings between 15 cents to 18 cents.

“The actions we took in China, beginning in late January, contributed to the steady business recovery we are experiencing, with over 95% of our stores now open, though many are operating with reduced hours and limited seating in compliance with local guidelines. We are encouraged to see similar improvements underway in South Korea, which reinforce both the resilience of our brand as well as our success in replicating our recovery model across markets as people are able to return to their daily lives and work,” according to the letter.

As the coronavirus pandemic continues, day-to-day life has changed for nearly everyone — down to what were once the simplest, most straightforward and least-considered parts of daily living.