Starbucks' Promotions Struggle To Attract US Customers, Shares Slip

By Dave Simpson
Starbucks' Promotions Struggle To Attract US Customers, Shares Slip

Starbucks Corp has reported stagnant store traffic at established US cafes for the second quarter in a row, stirring concerns about intense competition from upscale coffee houses as well as fast-food chains and convenience stores.

Same-store sales for the US-dominated Americas region rose 2% for the second quarter ended April 1. Increased spending per visit drove the same-store sales rise since customer visits, referred to as traffic, were flat.

Starbucks' home market of the United States is its largest, with more than 14,000 stores. During the quarter, US cafes offered 15% off new blonde espresso drinks and half-price espresso drinks during afternoon Happy Hour.

But China is Starbucks' biggest growth driver. Same-store sales in that 3,200-store market were up 4% in the second quarter, versus gains of 6% and 8% in the two prior periods. Executives attributed the softer results in the latest quarter to a shift in the timing of Lunar New Year. They said business remains strong, but declined to give traffic results.

Starbucks' global traffic was down 1% for the quarter, with the Europe, Middle East and Africa region falling 4%.


Total revenue rose almost 14% to $6.0 billion.

Starbucks' quarterly net income was $660 million, or 47 cents per share, compared with $653 million, or 45 cents per share, a year ago. Excluding items, profit of 53 cents a share matched expectations.

The company said its board authorized buying back 100 million shares, which is worth more than $5 billion at current prices.


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