Published: Wed, June 20, 2018
Markets | By Otis Pena

Starbucks to close 150 USA cafes to combat slowing growth

Starbucks to close 150 USA cafes to combat slowing growth

Competition from rivals like McDonald's and Dunkin' Donuts is heating up, said Bernstein analyst Sara Senatore in a research note.

The company anticipates lower net new store growth in the United States for fiscal 2019 and said it would address rapidly changing consumer preferences by introducing new cold drinks like a mango dragon fruit beverage and focusing on growing health and wellness trends.

The changes came weeks after Starbucks Executive Chairman Howard Schultz announced he would leave the role in June.

The company will triple its traditional annual average of closing about 50 stores as part of a streamlining effort including rapidly optimizing its USA store portfolio.

Starbucks shares slipped almost 2 percent in after-hours trading.

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Starbucks said it now expects earnings in the range of $3.23 to $3.26 a share for the current fiscal year, down about a dime from its previous targets.

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

It has missed analysts' estimates for same-store sales in the US -dominated Americas region in five of the last six quarters.

Historically, the Seattle-based company closes roughly 50 stores a year.

On a conference call with analysts, CEO Kevin Johnson said those regions include the Midwest and the South, where Starbucks is far less ubiquitous than it is in Manhattan and Washington, D.C. The news was reminiscent of Starbucks' efforts a decade ago to close stores following years of aggressive expansion that led to softening comparable sales growth. The company said the closures will result in a slightly lower growth rate in company-operated stores. That alliance frees Starbucks to focus on improving its mainstay US cafe business, where traffic growth had stalled.

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