Starbucks slips after announcing more store closures, cutting Q3 SSS view
Shares of Starbucks (SBUX) are trading lower in after-hours trading after the coffee giant announced a set of strategic priorities and operational initiatives to accelerate growth and create long-term shareholder value, with CEO Kevin Johnson saying the company's recent performance is "not acceptable." STRATEGIC PRIORITIES: In an effort to optimize its U.S. store portfolio, Starbucks said it will increase the closure of underperforming stores in its most densely penetrated markets to approximately 150 in FY19 from a historical average of up to 50 annually. In addition, the company is expanding its digital relationships with current and new customers and expects newer digital initiatives to contribute one to two points of comp growth in the U.S. in FY19. The company also noted it is making progress toward closure of the Global Coffee Alliance transaction with Nestle (NSRGY) to accelerate and grow the global reach of Starbucks brands in Consumer Packaged Goods and Foodservice. CAPITAL RETURNS: As a result of its new strategic priorities, Starbucks now expects to return roughly $25B in cash to shareholders in the form of share buybacks and dividends through fiscal 2020, an increase of $10B from the cash return target announced in November 2017. As part of the accelerated return, Starbucks' board approved a 20% increase the company's regular quarterly and declared a cash dividend of 36c per share. GUIDANCE SHIFT: As part of the strategic update, Starbucks cut its Q3 global comparable store sales view to 1% from its previous view of 3%. Following the press release, the company said at the Oppenheimer Consumer Growth and E-Commerce Conference that it was reducing its FY18 adjusted EPS guidance to $2.39-$2.43 from its previous view of $2.48-$2.53. Analysts expect the company to report FY18 EPS of $2.49. PRICE ACTION: In after-hours trading, Starbucks shares were lower by 1.6%.