Starbucks’ Forecast Misses Estimates After Labour Costs Climb

By Steve Wynne-Jones
Starbucks’ Forecast Misses Estimates After Labour Costs Climb

Starbucks, the world’s biggest coffee-shop chain, delivered a first-quarter forecast that missed analysts’ estimates, hurt by mounting costs for labour and technology.

Earnings in the period will be 44 cents to 45 cents a share, the Seattle-based company said in a statement Thursday. Analysts estimated 47 cents on average for the quarter, which ends in December.

Chief executive officer Howard Schultz has been focused on improving the company’s technology, aiming to speed up service and attract more customers. It rolled out mobile ordering in the U.S. in September and then brought the program to Canada this month. Starbucks also has been spending more money on employees, doling out college-tuition benefits and a wage boost.

Starbucks’ mobile-payments system, which lets customers pay with their smartphones, now makes up about 21 per cent of U.S. store transactions. The company also is rolling out mobile ordering to locations in the U.K.

"Technology is what’s driving their business, so they need to continue to invest in it," said Peter Saleh, an analyst at BTIG. "I think that’s hands down a great investment."


Starbucks has been trying to improve the quality and selection of its food to help increase sales domestically. It recently introduced seasonal items, such as apple pound cake, and new lunch items, including a peanut butter and jelly box, as well as a barbecue beef brisket sandwich.

Declining coffee prices also have been helping Starbucks’ profit. Arabica coffee prices have tumbled 28 per cent this year as better crop yields are expected from some of the world’s biggest growing regions.

Bloomberg News, edited by ESM