Starbucks has dropped almost 5% on Wednesday, as the company reported it anticipates a loss in its fiscal third quarter, predicting it gave up as much as $3.2 billion in revenue on account of the coronavirus pandemic, which shuttered stores for months.
Amid a broad market decline ahead of the FOMC meeting, the coffeemaker’s stock which has a market value of $92.6 billion, has declined 10% this year.
By the end of June, Starbucks expects weekly cash flow to be positive.
“With each passing week, we are seeing clear evidence of business recovery, with sequential improvements in comparable store sales performance,” CEO Kevin Johnson and CFO Pat Grismer wrote in a letter to stakeholders. “The Starbucks brand is resilient, customer affinity is strong and we believe the most difficult period is now behind us.”
The company has announced it will shutter 400 stores in the United States over the next 18 months while increasing its number of pickup locations, adapting to the needs of consumers amid the ongoing coronavirus pandemic.
Starbucks’ revenue plunged when stores were closed early in the coronavirus pandemic, as stores quickly adjusted to a drive-through only service.
U.S. same-store sales suffered 43% in May as the company reopened locations with modified hours and operations. Yet, by the end of May, 91% of U.S. stores had been reopened. In the last week of May, same-store sales were down 32%.
Currently, about 95% of U.S. locations are reopened, with the bulk of closed locations located in the New York City area.
Last month Starbucks requested rent concessions from its landlords, and referred to the closure of businesses across the country to stem the spread of the novel coronavirus “a staggering economic crisis,” adding that “the psychological and economic scars will last for months, if not years.”
“This is the worst recession since the Great Depression and far more devastating than the global financial crisis,” Chief Operating Officer Roz Brewer wrote. “What lays ahead is daunting but by no means insurmountable with a shared commitment and a clear path forward.”
ETFs holding the stock such as the Consumer Discretionary Select Sector SPDR Fund (XLY) and the iShares US Consumer Services ETF (IYC) are slipping on Wednesday as well.
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