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Starbucks Stock Plummets on Rare Earnings Miss, Weak Forecast

The world's largest coffee chain issued second-quarter numbers Friday morning, send shares down as much as 12 percent during the day with a rare Starbucks miss.  In addition to missing Wall Street estimates for both earnings and revenue, the iconic Seattle chain also offered a lowered forecast for the current quarter and fiscal 2013.  At one point early in the session, the stock slipped to $46.23, giving back a 14 percent gain made by the stock since the year began. though it had climbed back to $47.33 with just 15 minutes left in the trading day.

In the three months ended June 30th, Starbucks earned $333 million, or 43 cents a share, up nearly 20 percent from a profit of $279 million, or 45 cents from the same three months of 2011.  The figure was two cents shy of the average estimate from 27 economists polled by Bloomberg.  Revenue for the world's No. 1 coffee retailer rose 13 percent from the year-ago period to $3.30 billion, just missing the economists' consensus projection of $3.32 billion.  But by far the most alarming item in the company's earnings was its forecast for the current third quarter.

With consumer sentiment slipping in June and July, and high unemployment continuing to plague the nation, Starbucks experienced an alarming drop in same store sales in June and the trend has continued into July.  For the second quarter, the company's same store sales, or those at locations open at least 13 months, rose 7 percent in the Americas and 12 percent in the chain's Asia Pacific and China region.  Both figures fell below estimates by about 1 percent. 

Same store sales in the company's Europe, African and Middle East region were unchanged from the same period a year ago.  Same store sales are considered a key indicator of a retailer's health because they exclude sales at stores that have recently closed or opened.  Citing the recent sales slowdown, Starbucks issued a forecast for earnings of $2.14 per share for fiscal 2013, whereas the analysts in the Bloomberg survey were expecting a forecast of $2.28 a share.  With the European debt crisis continuing to hinder sales there, Starbucks indicated it is considering shuttering some of its unprofitable stores in the region.  A spokesman cautioned that closure costs could reach as high as $20 million for the fourth quarter.