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.

Add Zee Business as a Preferred Source

"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.)