Starbucks shares fall as coffee chain scales back store growth

FAN Editor

Shares of Starbucks slipped more than 3 percent Tuesday after the closing bell as coffee chain said it would scale back store growth.

“We must move faster to address the more rapidly changing preferences and needs of our customers,” CEO Kevin Johnson said in a statement Tuesday. “Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value.”

The company said it would slow the number of licensed stores it opens and close underperforming company-operated locations in densely populated areas. The company historically closes about 50 of these stores annually, however in 2019 it expects to close about 150 stores.

Johnson is set to present at the Oppenheimer Annual Consumer Conference in Boston on Tuesday, outlining his plan for Starbucks moving forward.

Johnson became CEO April 2017, succeeding Howard Schultz, who shifted his focus to the company’s Roastery and Reserve Bars and took the title of executive chairman. Earlier this month, Schultz said he would be stepping away from the company completely, effective June 26.

Despite leaving the top post more than a year ago, Schultz is still considered the face of the brand and often mistakenly referred to as CEO. As he plans his exit, some investors expect there will be a void after he is gone.

Since taking over as CEO, Johnson has labored in Schultz’s shadow. The pair were separated only by a door in their Seattle office and last quarter’s earnings call was the first that didn’t include Schultz.

While some have praised Johnson’s tech-savvy innovation and the company’s growth in China, others have lamented over the ongoing weak sales of food and beverages and merchandise in the U.S.

After beating same-store sales expectations in the fourth quarter 2016, Starbucks had five straight quarters of missing analyst forecasts. It was only in the most recent quarter, that the company once again topped expectations. However, the company reported that traffic remained flat.

The coffee giant has been working on a number of initiatives to turn around these weak sales, including offering more cold beverages, which are now 50 percent of its business, and new lunch items to draw people into its cafes in the afternoon.

In addition, Starbucks has been working to grow the number of people who use its loyalty program and mobile app. In the last quarter, these customers accounted for 39 percent of sales at company-owned stores in the U.S., according to Starbucks.

The coffee chain expects it will see global same-store sales growth of between 3 and 5 percent for the year.

This is a breaking news story. Check back for updates.

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