Starbucks Sees Signs of Recovery in China

Late today, Starbucks announced seeing signs of “early recovery” in China despite coronavirus fears and current dire restrictions put on citizens.

Despite a 13% year-to-date drop in its stock and a 4.4% drop today, Starbucks says its sales in the US are strong. This is good news since Starbucks has made 65% of its revenue in the United States during the first quarter of 2020.

The company has reduced revenue expectations in China by $400 million for the first quarter. Starbucks enjoyed $745 million in sales in China during the final quarter of 2019.

In a filing with the Securities and Exchange Commission, Starbucks said the COVID-19 virus has not affected sales in the US and the company has an optimistic long-term outlook that has not changed.

In February, Starbucks sales in China were down 78% from last February. The company expects sales in China for 2020 to be roughly half of 2019’s. The company had suspended work on new stores that were to be opened in the country. These stores were planned before the coronavirus fears stifled Starbucks’ 3% projected growth in China.

Approximately 90% of Starbucks stores in China are now reopened, with 5% more expected to reopen during the second quarter. However, these stores are operating in “safe mode” with limited seating and focus being on its mobile ordering service.

80% of Starbucks stores in China had been closed due to COVID-19. The company decided to pay workers despite the closures. While this is great for employees, the earnings per share are expected to drop as much as 18 cents.

The good news for Starbucks is the company has the money to weather the coronavirus storm. Although revenue and earnings have dropped, Starbucks has a substantial cushion to keep it afloat during difficult times like these.