Starbucks (SBUX) fiscal second-quarter results took a hit, as the company reported a steep drop in profit and comparable sales as the coronavirus crisis forced the shuttering of cafes in the U.S. and China, it’s two largest markets.
Here are the key numbers from the report, and what Wall Street expected from the company, as compiled by Bloomberg:
Adjusted earnings per share: 32 cents versus 34 cents expected
Global same store sales: -10% year over year versus -9.7% expected
The coffee giant was not immune to COVID-19 pandemic that’s wreaked havoc on the global economy with store closures and stay-at-home orders. When the virus first took hold in China earlier this year, Starbucks was among the first wave of multinationals to shutter stores in the Middle Kingdom.
During the quarter, Starbucks earnings plunged 47% from the 60 cents reported in the same period a year ago. In the U.S., comp sales were down 3%, while international comp sales fell 31%.
According to analytics firm Placer.ai, nationwide data showed March took a hard hit as U.S. lockdowns shut down nonessential businesses, with visits plunging 30.2% below the baseline — a decrease of over 36% year over year.
The company had previously noted in a recent filing that U.S. comp sales had been on track to deliver 8% growth for the first ten weeks of the quarter, but sales worsened because of the pandemic.
All told, Starbucks opened 255 net new stores in the quarter.
Learning from China
In January, the coffee giant had closed more than half of its stores 4,100 in mainland China. Presently, however 98% of the Starbucks stores in China are open, but many with modified operations.
The global coffee giant expects the impact of the virus to “intensify” in the fiscal third quarter, which will give way to moderation in the latter part of the year. Striking a tone of optimism, Starbucks expects a “substantial recovery” in China
“Since the beginning of this global crisis, Starbucks has made decisions that prioritize the well-being of our partners and customers, support health and government officials, and responsibly serve our communities,” CEO Kevin Johnson said in a statement.
“This principled approach is showing steady business improvement in China where today, substantially all existing Starbucks stores have reopened with modified operations, new store locations are being added and customer engagement continues to grow with each passing week,” he added
According to Johnson, Starbucks is using the China experience to inform its decisions in other markets. Right now, the company has entered what it calls the “monitor and adapt” phase in the U.S. to re-open stores with “best-in-class safety protocols,” he added.
“We continue to navigate this dynamic situation — which we believe is temporary — and are confident that Starbucks will emerge from this global crisis even stronger than before,” Johnson said.
Prioritizing partners
On March 15, Starbucks suspended café seating and moved to a “to go” format in the U.S., and also pivoted to drive-thru and delivery only to adhere to social distancing rules.
Approximately 60% of the 15,000 Starbucks stores in the U.S. offer drive-thru service. The coffee chain offers delivery in partnership with Uber Eats across 49 markets in the U.S.
During this time, more customers signed up for the Starbucks app, with the Starbucks Rewards loyalty programming growing to 19.4 million active members in the U.S., up 15% from a year ago.
During the pandemic, Starbucks rolled out temporary COVID-19 related benefits for its U.S. employees, including higher hourly wages for those willing and able to work, and catastrophe pay for those who can’t work through the end of May. For those choosing to work, the coffee giant recently sweetened the hourly pay with an extra $3 per hour and will continue providing that premium through the end of May.
What’s more, if a partner’s home store is closed, they will have the option to work at a nearby location that’s open. To be sure, employees who are healthy, but unwilling to work after May 3, will no longer receive the catastrophe pay.
However, the catastrophe pay will be available through the month of May for anyone who needs to stay home because of a diagnosis or need to self-isolate, or if their store needs to remain closed during that time, or if parents need to homeschool their children.
Julia La Roche is a Correspondent at Yahoo Finance. Follow her on Twitter.