Starbucks Shares Are Falling After This Bad News
Starbucks (SBUX) forecast current-quarter earnings below Wall Street estimates and reported slower growth in Asia than many had hoped, sending its shares down nearly 3% in early trade despite a strong holiday performance.
Investor expectations are usually high for the company after a more than 46% run-up in its stock in 2015, and Starbucks is betting heavily on China expansion despite some signs of cooling growth in the Asian market.
Global sales at cafes open at least 13 months rose 8% in the first quarter, while they rose 9% in the Americas division, Starbucks’ largest. Both handily beat analysts’ estimates.
But sales in Europe were hit on a drop in tourists following the November Paris attacks and the strong dollar, which also hurt sales in its Asia/Pacific region, COO Kevin Johnson said on an earnings call.
Sales at cafes open at least 13 months rose 5% in Asia/Pacific in the first quarter ended Dec. 27, missing the 6.10% increase expected by analysts polled by research firm Consensus Metrix.
“The concern is that some of this is related to a general slowdown in China which, if part of a longer term trend, could harm company earnings,” Carter Harrison, analyst at research firm Conlumino said.