* Q3 EPS $0.43 vs Street view $0.45
* U.S. traffic slowed in June
* Shares down more than 9 percent
By Lisa Baertlein
July 26 Starbucks Corp cut its outlook
for the current quarter, citing global economic weakness and a
recent slowdown in visits in the United States, its biggest
market for sales and profits, sending shares tumbling more than
The stunning news from one of the food industry's top
performers followed disappointing results from restaurant chains
Chipotle Mexican Grill and McDonald's Corp and
added to worries that U.S. consumers were cutting discretionary
The world's biggest coffee chain began seeing U.S. traffic
slow in June, Chief Executive Howard Schultz said in an
The company, which also missed Wall Street's estimate for
earnings in the latest quarter, has been struggling in Europe
for some time.
"We're dealing with significant global economic and consumer
challenges," Schultz said of the company.
"Traffic trends are noticeably down in many areas across the
U.S. and ... have continued in July," Chief Financial Officer
Troy Alstead said on a conference call with analysts.
Up until recently, the relatively affluent U.S. consumers
who frequent chains like Starbucks and Chipotle had continued
spending despite negative economic headlines at home and around
"The economic environment is definitely getting tougher,"
Edward Jones analyst Jack Russo said.
"Coffee's an everyday product, but it is a premium product
and people can trade down or consumer less," he said.
Starbucks now expects earnings for the current fiscal fourth
quarter to be 44 cents to 45 cents a share, below the average
analyst forecast of 48 cents a share.
Shares in the company had brewed up a year-to-date gain of
almost 14 percent prior to Thursday's financial report, based on
strong growth and Starbucks' seeming ability to deflect
whatever shock the global economy could throw its way.
Expectations had been very high, Russo said: "It was still a
good quarter ... there just wasn't any margin for a miss."
Shares in Starbucks dropped 9.4 percent to $47.46 in
HIGHER PROFIT STILL A MISS
Net income for the fiscal third-quarter ended July 1 grew a
healthy 19 percent to $333.1 million, or 43 cents per share, but
still missed analysts' average forecast by 2 cents per share,
according to Thomson Reuters I/B/E/S.
Global sales at restaurants open at least 13 months rose 6
percent, just shy of what analysts expected, according to both
Thomson Reuters and Consensus Metrix.
That included a 7 percent gain for the Americas region and a
12 percent jump for the China-Asia Pacific unit.
In Europe, same-store sales were flat. Starbucks long has
fought to make its mark on the well-established cafe culture in
that region, where government belt-tightening has dented
The company's forecast for earnings of $2.04 to $2.14 per
share next year also was significantly below analysts' average
estimate of $2.28 per share.
Still, its expectation for same-restaurant sales growth in
the mid-single-digit percentage range next year is
"significantly positive," said Lazard Capital Markets analyst
Matt DiFrisco, who counts Starbucks and Panera Bread Co
as his top picks in the restaurant category.