Starbucks Sees No Impact on Sales From Philadelphia Arrests Aftermath

April 27, 2018, 5:06 PM UTC

Starbucks’ (SBUX) deft handling of the fallout from an incident last month that saw two men arrested at a Philadelphia store seems so far to have spared the coffee chain from any hit to sales.

The company, which reported quarterly earnings late Thursday, said the arrests, which were followed by protests and calls to boycott Starbucks, have not had a noticeable impact on sales so far in April.

“I acknowledge it’s still early, but we are not seeing an impact on comp(arable) sales as a result of Philadelphia,” CEO Kevin Johnson told Wall Street analysts on a conference call.

In what will be likely end up being seen as a masterclass in crisis management, Johnson took prompt action as a video of the incident went viral and threatened to engulf Starbucks in a major controversy. He immediately traveled to Philadelphia, met with the men in question and civic leaders, and announced that Starbucks would close all its U.S. stores for a few hours on May 29 to provide racial bias prevention training.

“We are focused on the long term and doing the right things, and we will be a better company because of this,” he told the analysts.

At this point, Starbucks could ill afford customers staying away from its restaurants. Starbucks’ first-quarter results show that the coffee chain continues to struggle with soft traffic in the United States, quantified by a drop in the number of transactions. (Higher prices more than mitigated that, but fewer people coming to stores is a problem Starbucks needs to lick.)

It was the second quarterly drop in store traffic at established U.S. cafes in a row, raising fears about Starbucks’ ability to fight the intense competition from upscale coffee houses and the likes of McDonald’s and Panera. Starbucks is trying to fix that, in part, by drumming more business in the afternoon, when things are typically quiet in its restaurants. Still, its promotions struggled to catch on with customers: In the U.S., it offered 15% off new blonde espresso drinks among other efforts, but customers did not show up in droves.

Starbucks’s shares (SBUX) were down 1.9% on Friday afternoon.

Total company revenue rose 14% to $6 billion, while net income edged up to $660 million from $653 million a year earlier.

As for the Philadelphia incident, Johnson sees an opportunity to improve the company, a few hours of lost sales notwithstanding. “All companies make mistakes,” he said. “Great companies learn from them.”

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