Starbucks says China business is recovering, but second-quarter will take hit to sales from coronavirus closures

A man wearing a face mask walks past a deliveryman as he waits outside a Starbucks store as the country is hit by an outbreak of the new coronavirus, in Beijing, China February 7, 2020.

Jason Lee | Reuters

Starbucks warned investors on Thursday that store closures in China due to the coronavirus outbreak are likely to result in a 50% decline in its same-store sales in China during its fiscal second quarter. 

However, it said that it was seeing signs of a pickup in its business in China, and it hasn’t yet detected any slowdown in the U.S. Shares of the company fell less than 1% in extended trading. 

For the entire fiscal year, the shuttered stores will cut revenue by between $400 million and $430 million in China, the coffee chain said in a filing with the Securities and Exchange Commission. 

Prior to the coronavirus outbreak, Starbucks predicted China’s second-quarter same-stores sales growth would be about 3%. However, the widespread COVID-19 outbreak, which begain in China, forced Starbucks to close the majority of its stores at the beginning of February.  

During the first quarter, China made up about 10% of its revenue. 

The company stated that more than 90% of its stores in China are now open but are operating under elevated safety protocols, including minimal cafe seating. The cafes have also reduced store hours due to overall low levels of foot and vehicle traffic, the company said. 

Starbucks said that it plans to have all stores to open by the end of the quarter and travel “will improve modestly” in comparison to February’s severe slowdown. The statement added that the company has halted new store openings in China, and it has pushed back some openings until its next fiscal year. 

“In short, we see encouraging signs of recovery in China, our U.S. business momentum continues, and we are prepared to respond to implications of COVID-19 in every market around the world,” Starbucks CEO Kevin Johnson said in the filing. 

The company had previously stated in its first-quarter earnings that the coronavirus outbreak could deal a blow to its fiscal 2020 outlook, but it said the magnitude of the impact would depend on the duration of store closures. 

Starbucks also moved its annual shareholder meeting scheduled for March 18 online due a coronavirus outbreak in the Seattle region.