Starbucks expects China business to “fully recover” over the next two quarters
The decline of comparable store sales in March was less compared to February.
Starbucks Corporation says it is seeing “more evidence” that its business in China will “fully recover” over the next two quarters.
In an open letter to stakeholders, president and CEO Kevin Johnson and CFO Patrick Grismer detailed that recovery in China continued at a “slightly faster pace” through March, where comparable store sales declined by 64% compared to a 78% decline in February.
Comparable stores sales declined by 42% in the last week of March, the seventh consecutive week of sequential improvement and the approximate midpoint of recovery from a weekly low of -90% in mid-February.
“Additionally, as the recovery in the market continued, a return to in-store transactions was reflected in the mix of mobile orders which accounted for approximately 27% of China’s sales mix during the last week of March, down from approximately 80% in the last week of February,” the letter said.
With a shortfall of approximately US$400 million compared to its expectations prior to the emergence of COVID-19, China’s revenue underperformance in Q2 is said to be at the lower end of the projected range they outlined in a previous letter.
This underperformance, they said, was driven by a 50% decline in comparable store sales for the quarter, primarily due to temporary store closures, reduced operating hours and severely reduced customer traffic during the period.
“While the impact of COVID-19 delayed store opening plans in China, development activities resumed towards the end of Q2 with the opening of two new stores in late March, including a Starbucks Now store in Shenzhen. Our recovery plan is working and delivering results,” the letter added.
