published Apr 26, 2018, 4:12:01 PM, by Leslie Patton
(Bloomberg) —

Starbucks Corp.’s half-off drink deals and extra rewards offers helped it meet expectations in the latest quarter, but the shares dropped — a sign investors were expecting more.

The coffee giant said adjusted profit met estimates, while comparable sales — a key metric — showed growth slightly above projections. Chief Financial Officer Scott Maw assured investors in a statement Thursday that the company is investing “strategically and with a ‘long game’ mentality.”

Wall Street may be getting impatient, however. The shares fell as much as 3.7 percent to $57.20 at 4:38 p.m. after the end of regular trading in New York. The stock had been up 3.4 percent since the start of the year though Thursday’s close.

Starbucks has seen sales growth slow recently, especially in its home market. Along with extra rewards, marketing emails and a branded Visa credit card, Starbucks is looking to new cold drinks to help its U.S. business, particularly in the slower afternoon period.

“We’re going after the afternoon, which remains our softest day part,” Maw said in an interview. “People’s routines have changed in terms of them being out and about as much.”

Dunkin’ Doldrums

Dunkin’ Donuts also pointed to a slower post-lunch business for hurting sales and traffic in its most recent quarterly results. Comparable sales trailed estimates for its U.S. business, Dunkin’ Brands Group Inc. said Thursday. As a result, the company is experimenting with $2 snack items to lure the post-lunch crowd.

“We’re looking at how we can become even more competitive in the afternoon,” Dunkin’ Chief Executive Officer Nigel Travis said in an interview. “We’re testing a bunch of products that we think are going to have great value.”

For Starbucks, same-store sales were still positive, increasing 2 percent in the Americas region, while analysts estimated a gain of 1.8 percent, according to Consensus Metrix. They also rose 2 percent in the prior quarter. Earnings excluding certain items amounted to 53 cents a share in the quarter, matching analysts’ projections.

Revenue rose to $6.03 billion. Analysts had projected $5.93 billion.

Starbucks is ramping up growth in China, and has said that market could be larger than the U.S. some day. But the company may face more competition abroad as Whitbread Plc spins off its Costa Coffee chain following pressure from activist investors. Costa has spread across the U.K., and is focused now on growth in China, where it plans to more than double its stores to 1,200 by 2022.

Comparable sales in China and Asia Pacific climbed 3 percent. Analysts estimated a gain of 2.6 percent. In Europe, the Middle East and Africa, they dropped 1 percent, trailing projections.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net Jonathan Roeder
COPYRIGHT
© 2018 Bloomberg L.P