The company also warned that its fiscal third-quarter results will take an even bigger hit from the pandemic, even as sales in China begin to recover.
Shares of the company fell less than 1% in extended trading.
Here’s what the company reported for the quarter ended March 29:
- Earnings per share: 32 cents, adjusted
- Revenue: $6 billion
The coffee chain reported fiscal second-quarter net income of $328.4 million, or 28 cents per share, down from $663.2 million, or 53 cents per share, a year earlier.
Excluding items, Starbucks earned 32 cents per share, down nearly half from the prior year. Catastrophe pay for baristas, hourly pay increases and the cost of store safety items such as face coverings weighed on profits during the quarter.
Net sales dropped 5% to $6 billion as Starbucks closed cafes and government officials told consumers to stay at home. The company estimates that it lost $915 million in sales during the quarter due to store closures, reduced operating hours and lower customer traffic resulting from the pandemic.
Wall Street anticipated earnings per share of 34 cents on revenue of $5.89 billion, based on a survey of analysts by Refinitiv.
Global same-store sales declined 10%, as overall transactions sank 13%. U.S. same-store sales fell 3% during the quarter, while Chinese same-store sales plunged 50% in the same period. Sales in China have improved after the company started reopening cafes in late February and consumers adapt to a new normal.
Starbucks expects that same-store sales in China will decline between 15% and 25% in fiscal 2020, as sales continue to rebound in the second half of the fiscal year. About 98% of Chinese cafes have reopened and are operating under modified hours with enhanced safety protocols.
About half of Starbucks’ U.S. company-operated locations are closed. The company is preparing to start reopening U.S. cafes next week as some U.S. states report that the number of new coronavirus cases has plateaued or even declined. By early June, Starbucks expects to have 90% of company-operated U.S. locations reopened, with modified operations and hours. The company plans to add curbside pickup later this summer, COO Roz Brewer said.
Earlier this month, the company withdrew its fiscal 2020 forecast, citing the “dynamic nature” of the coronavirus crisis. Starbucks said Tuesday it expects its fiscal third-quarter results to show steeper declines from the pandemic, given that social-distancing measures and shelter-at-home orders went into place in the U.S. near the end of March. Negative financial impacts are expected to moderate in the fiscal fourth quarter.
“Based on our substantial experience in China to date, we continue to believe that the impacts of the Covid-19 outbreak are temporary and that our business will fully recover over time,” the company said.
Starbucks had $2.57 billion in cash and cash equivalents on hand as of March 29. The company has suspended its share buyback program, although it continues to pay investors a quarterly dividend.