Chicago (Bloomberg): Starbucks Corp. has closed more than 2,000 locations in mainland China because of a viral outbreak that has killed more than 100 people and disrupted daily life in the coffee chain’s most important growth market.
“We will be transparent with all stakeholders in communicating how we are responding to these extraordinary circumstances and the implications for our near-term business results,” CEO Kevin Johnson said in a statement. He also reaffirmed the company’s commitment to China.
On the ground at its China stores, the chain has adjusted menus because the virus has disrupted its supply chain, its executives said on the call. Starbucks has also altered store opening hours, they said.
China and the US are the most important markets for Starbucks as the Seattle-based chain seeks to recapture its rapid growth of past years. The results show the strategy is paying off - with higher customer traffic in the two nations particularly encouraging.
The coronavirus, of course, will be the wild card in whether Starbucks can maintain its pace. The company is expanding aggressively there, with global store growth of 6 per cent in the quarter led by China, where the chain has more than 4,000 locations.
Starbucks said it couldn’t “reasonably” estimate the impact of the coronavirus, but expects the outbreak to “materially affect” fiscal second-quarter and full-year results.
The news cast gloom over what otherwise would have been an upbeat earnings report. Same-store sales, an important gauge of success for restaurant chains, rose 5 per cent in the fiscal first quarter that ended December 29. The company maintained its 2020 forecast but said it doesn’t include the impact of temporarily closing so many stores because it can’t yet calculate it.