Starbucks Corporation (NASDAQ:SBUX) witnessed a free-fall in stock prices after the coffee mega chain reported less than expected earnings, and lowered outlook for the current quarter on Thursday. The Seattle-based, world’s largest coffee-shop, chain earned $333.1 million or 43 cents per share, a 19 percent increase over $279.1 million in the corresponding quarter last year. Analysts were expecting the earnings of 45 cents per share. Though net sales jumped 13 percent, it wasn’t up to the estimates.
Starbucks Corporation (NASDAQ:SBUX) has lowered its fourth quarter projections from 47 cents per share, to 44-45 cents per share. The company’s share prices fell 10 percent to $47.07 per share, after the opening bell today. The decline in profits is mainly because customers around the world are cutting back on their expenses in a tumultuous economy.
Starbucks is not the only company that has disappointed investors. UPS, Ford, DuPont, all of them have raised concerns over current economic conditions. Starbucks has given hints that it may shut down some unprofitable stores in Europe. It currently has over 17,400 store worldwide.
“Europe continues to be our most challenged part of the world by far,” says Starbucks CFO Troy Alstead. “The European economy is extremely challenging, and perhaps worsened during the quarter. We are currently conducting a more thorough portfolio review … [and may] potentially close more stores in Europe over the next few quarters, beginning in the fourth quarter.”
However, CEO Howard Schultz is trying to attract more and more customers, by offering customers energy drinks, juices, and fast foods along with its traditional coffee. He also acquired San Francisco-based, Bay Bread LLC to expand the business into high quality food and bakery products. “We’re dealing with significant global economic and consumer challenges,” said Schultz during a conference call with media.
Despite all the challenges, Starbucks plans to open 1200 new stores in 2013. Most of the new stores will be opened in the US and China, the company said.