Starbucks predicts a 50% sales drop in China because of coronavirus
In February, sales at stores open at least 13 months in China dropped 78% compared to the prior year because of temporary store closures, reduced hours of operation and a sharp decline in customer traffic, CEO Kevin Johnson and CFO Patrick Grismer noted in a letter to stakeholders Thursday.
Before the outbreak, the company expected sales at stores open at least 13 months to jump by 3%. Now, it estimates a 50% decline, and a hit of between $400 million to $430 million to its revenue in the country compared to earlier expectations. And it may delay opening some stores in the country.
Since then, it has reopened most of its locations. Today, more than 90% of Starbucks stores in China are open for business. But things aren’t back to normal at those locations. The open stores still have reduced hours and are limiting seating to keep customers at a distance from one another. Some cafes are just offering delivery. The company expects 95% of stores to be open by the end of the second quarter, but with this type of limited service.
Employees wear masks, and undergo temperature checks daily. They also avoid touching customers by using “contactless” service.
The financial impacts are “temporary,” Johnson and Grismer said in the letter. “We remain confident in the strength of the Starbucks brand and the long-term profitability and growth potential of our business in China.” They added that the signs of recovery in China are “encouraging.”
The company is also enhancing cleaning in its North American stores. The virus has not impacted business in the United States at this point.