(WFLA/AP) – Starbucks expects to lose more than $3 billion in revenue in its fiscal third quarter due to the new coronavirus, but said the disruption to its business should subside through the rest of the year.
“The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us,” Starbucks President and CEO Kevin Johnson said in an open letter.
The company said it plans to close up to 400 stores in the US and Canada over the next 18 months, while at the same time adding carryout and pick-up only locations.
In its latest SEC filing, the company said it ultimately expects to open about 300 new North American stores that specialize in carryout and pickup options.
“This repositioning will include the closure of up to 400 company-operated stores over the next 18 months in conjunction with the opening, over time, of a greater number of new, repositioned stores in different locations and with innovative store formats,” the company wrote in its filing.
The Seattle-based coffee giant said in a regulatory filing Wednesday that the virus outbreak will also slash its operating income between $2 billion and $2.2. billion for the quarter, which ends June 28. Starbucks plans to report its third quarter results on July 28.
Starbucks said U.S. same-store sales, or sales at locations open at least a year, improved for six consecutive weeks through the end of May. They fell by 32% the last week in May, compared to a 65% decline at the pandemic’s height in mid-April. The company says it expects a 10% to 20% decline in U.S. same-store sales for its full fiscal year, which ends Sept. 27.
In China, where the pandemic hit first, same-store sales were down 14% at the end of May. That compares to a 78% decline in February. Starbucks said most stores in China have returned to pre-pandemic operating hours and 70% are now offering full cafe seating.
Starbucks provided a preliminary estimate for a third-quarter adjusted loss of about 55 cents to 70 cents per share. Analysts polled by FactSet predict a loss of 16 cents per share.
With many workers still at home and customer traffic patterns shifting, Starbucks said it’s accelerating a plan to build smaller, pickup-only locations in major U.S. cities. It’s also retrofitting some cafes to better accommodate mobile pickup and delivery orders.
The company said it was re-evaluating how it sells coffee prior to the COVID-19 pandemic due to customers in major cities already showing a greater tendency to order coffee on the go.