Starbucks lowers profit forecast, speeds closures of poorly performing stores

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The controversy was the biggest public relations test yet for new Starbucks Chief Executive Kevin Johnson, who already was fighting to boost traffic to Starbucks amid competition from coffee sellers ranging from hipster cafes to fast-food chains and convenience stores.

The company said comparable sales growth at existing stores, a key measure of retail performance, was expected to be just 1 percent in the current quarter, despite a booming economy and a broadly healthy restaurant industry.

The world's largest coffee chain has faced increasing competition from upscale coffee houses and fast-food chains like McDonald's Corp and Dunkin Donuts in recent years, missing analysts' estimates for same-store sales in the US -dominated Americas region in five of the last six quarters. "Now, in a lot of ways, it's middle America and the South that presents an opportunity". Investors cheered as Schultz retook the helm and closed some underperforming stores, and share prices at the chain have been up eight of the last 10 years.

In early May, Swiss-based Nestle (NESN.S) said it would pay Starbucks $7.15 billion for exclusive rights to sell Starbucks coffees and teas.

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"The competitive environment has really become a lot stronger in the US and a lot of that is the fast-food chains really improving the quality and breadth of their offerings in terms of hot beverages and breakfast", said Bloomberg Intelligence analyst Jennifer Bartashus.

Outgoing Starbucks chairman Howard Schultz acknowledged at the time that the racial bias training closures would cost "tens of millions" but that he saw the closures as an investment in Starbucks employees. The company is also preparing to "lean into more plant-based beverages", he said, noting that a new plant-based protein cold-brew drink will be introduced this summer. "That becomes an area of concern for Starbucks".

Starbucks said it will return an additional $25 billion more to shareholders than initially planned in the form of share buybacks and dividends.

Starbucks said it would look to open more stores in under penetrated markets and explore strategic options to license company-operated stores. Notably, as from 2019, it plans to shift its focus for new stores in the United States away from areas where it already has a strong presence and to underserved markets.