Starbucks shares tumble on fears of slowing U.S. growth
Starbucks Corp`s shares fell more than 7 percent on Friday as its membership growth slowed in the United States, triggering concerns over the U.S. coffee chain`s ability to meet long-term growth targets.
The company on Thursday reported profit that met Wall Street expectations in the first quarter under new CEO Kevin Johnson, but lowered its current-quarter earnings forecast. Starbucks also said it would shutter all its Teavana stores.
Starbucks` U.S. business — already suffering from heightened competition from meal kit sellers and convenience stores — has seen membership growth slow down due to changes made in its loyalty rewards program last year, analysts said.
"With (loyalty) growth continuing to slow, we fear U.S. same store sales are unlikely to maintain the mid-single digit range that the market has come to expect," Credit Suisse analysts said in a report.
Starbucks changed its rewards program last year to award points for every dollar spent at its cafes, a departure from its earlier practice of giving points for every purchase, which put customers buying cheaper items at a disadvantage.
"(Starbucks`) long-term forecast for mid-single digit global comparable sales growth, double digit revenue growth and 15-20 percent earnings growth may no longer be a realistic target," analysts at Wedbush Securities said.
Seven analysts lowered their 12-month targets on Starbucks` share price to as low as $56. The median price target is $66.
Still, Wall Street highly recommends the stock with 26 of the 33 analysts covering it having a buy or higher rating.
Starbucks` shares were down 7.6 percent at $54.95 in early trading and the company was on course to shed about $7 billion in market value.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.