SBUX Starbucks Corporation

By Heather Haddon and Micah Maidenberg 

Starbucks Corp. said customers in the U.S. helped to drive up sales in its latest quarter, but the coffee chain faces a new threat to business in China after temporarily closing more than half of its stores in China because of the coronavirus outbreak.

The Seattle-based company said Tuesday the closures in its second-largest market would have an effect on the fiscal second-quarter and full-year financial results. Starbucks had 4,292 stores in China at the end of last year, up 16% from 2018.

"We remain optimistic and committed to the long-term opportunity in China," Chief Executive Kevin Johnson said.

Other chains including McDonald's Corp. and Yum China Holdings Inc. also have closed stores in China as the virus has spread. The outbreak has weighed on the shares of U.S. brands with big Chinese footprints, along with the markets overall.

Starbucks said it is maintaining much of its fiscal guidance for this year, rather than raising some portions, because of the potential impact from the coronavirus.

"This is a very complex situation," said John Culver, the company's head of international channel development and global coffee and tea. "We are assessing this each and every day."

Shares in Starbucks fell 1% after hours after the chain reported $7.1 billion in revenue for its fiscal first quarter, up 7% from a year earlier and in line with estimates from analysts polled by FactSet.

Comparable sales, or those from company stores open for at least 13 months and excluding currency fluctuations, rose 5% globally.

The company said its comparable sales increased 6% in the U.S. and 3% in China. The domestic market gain matched the company's performance in its previous quarter, but growth in China was 2 percentage points slower than that period.

New-store construction in China fueled Starbucks's performance there.

Growth in the company's digital loyalty program and new beverages, particularly cold ones, bolstered sales globally, Starbucks said. Strong holiday sales also boosted performance during the quarter, according to the company.

Starbucks was helped in 2019 by in part by its lineup of cold beverages, including nitro-cold brewed coffee drinks.

Fast-food chains including McDonald's and Dunkin Brands Group Inc. have also introduced more cold coffees and stepped up their offerings at breakfast, an increasingly competitive part of the day.

Starbucks said it plans to introduce a plant-based breakfast sandwich in the U.S. and Canada this year.

Starbucks reported a quarterly profit of $885.7 million, or 74 cents a share, up from $760.6 million, or 61 cents a share, a year earlier. Its adjusted earnings of 79 cents a share was 3 cents more than analysts expected.

Write to Heather Haddon at heather.haddon@wsj.com and Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

January 28, 2020 18:54 ET (23:54 GMT)

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