Published: Wed, June 20, 2018
Life&Culture | By Rose Hansen

Starbucks lowers profit forecast, speeds closures of poorly performing stores

Starbucks lowers profit forecast, speeds closures of poorly performing stores

Starbucks shares fell as much as 3% in after-hours trading Tuesday after the coffeehouse chain provided a weak sales forecast for its upcoming quarter and said it would shutter 150 stores in fiscal 2019.

He also pointed to the impact of the company's response to the April arrest of two black men in a Philadelphia store, including the May 29 afternoon closure of 8,000 US stores for anti-racial bias training.

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

Meanwhile, sales are expected to grow just 1 percent in the next quarter.

The firm organized the session following the public outcry over two black men getting arrested for sitting at one of the tables without ordering a drink. It also said that it would return about $25 billion in cash to shareholders through buyback programs as well as dividend offerings - which was about a $10 billion increase from the previously announced target. Starbucks said it traditionally closes about 50 underperforming locations annually. The locations of the stores to be closed have not been released. At Starbucks, Frappuccino sales were down 3 percent this year through May.

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The company anticipates lower net new store growth in the United States for fiscal 2019 and said it would take steps to address rapidly changing consumer preferences by introducing new beverages, focusing on growing health and wellness trends.

The former Chairman Howard Schultz stepped down earlier in June.

"It is not an excuse", for the 1 percent growth rate, Johnson added.

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 company also said it would look to cut general and administrative expenses with plans to partner with an external consultant to speed up the process.

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