Sales froth goes flat at US Starbucks

Starbucks isn’t immune to the slump plaguing the restaurant industry in the US. The coffee giant cited a “challenging environment” as it posted disappointing quarterly growth and cut its annual sales forecast this week.

Starbucks now expects revenue to rise between 8% and 10% this fiscal year after predicting a double-digit increase.

The results signal that Starbucks’ momentum is slowing, just as Howard Schultz prepares to leave his post as chief executive officer in April.

A shift toward online shopping — coupled with consumer uncertainty that’s lingered from the US presidential election — may be keeping some customers at home. Low US grocery prices also are making restaurants seem relatively expensive to Americans.

Another concern: Starbucks no longer has much room to grow in its home market, said Jennifer Bartashus, an analyst at Bloomberg Intelligence.

“Starbucks is really starting to hit the saturation point in the US,” she said. “The question with that is how are they going to continue to grow same-store sales.”

Same-store sales rose 3% in the first quarter, short of a 3.7% gain predicted by analysts. Sales decreased 1% in Europe, the Middle East and Africa, compared with a 1.8% growth projection. They rose 3% in the Americas, but short of the 3.9% growth estimate.

Starbucks’ bottom line fared better. The company posted earnings of 52 cents a share, which matched analysts’ predictions.

Starbucks has been trying to improve its food in the US to lure more customers, especially beyond morning hours. This year, the company is adding fancier items to its US menu, including Sous Vide Egg Bites and a gluten-free breakfast sandwich. To attract the on-the-go crowd, Starbucks also is expanding its snack-based meals called Bistro Boxes.

Its mobile ordering and payment platform, meanwhile, has helped speed up lines at its US, Canadian and UK cafés. The company is planning to expand this capability to more markets abroad. In the US, mobile payments already account for about 27% of transactions.

Mr Schultz, who has served two terms as head of Starbucks, will hand the reins to technology veteran Kevin Johnson in April.

The announcement initially jarred investors, but the company has since bolstered its board with nominations for new directors.

The additions include Sam’s Club chief executive Rosalind Brewer; Jorgen Vig Knudstorp, executive chairman of the Lego; and Microsoft CEO Satya Nadella. Mr Schultz, 63, will keep the role of executive chairman.