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Starbucks cafe sales miss targets as growth cools

The world's largest coffee chain said global sales at cafes open at least 13 months rose 4% in its fiscal third quarter
The world's largest coffee chain said global sales at cafes open at least 13 months rose 4% in its fiscal third quarter

Starbucks last night reported quarterly cafe sales growth that fell short of expectations in all major markets as customers made fewer visits, sending its shares down almost 3%. 

Results from the US, which contributes the lion's share of sales and profits, missed targets due to the delayed start of a popular Frappuccino Happy Hour promotion.

The company also saw weaker demand that executives attributed to a contentious US presidential election campaign, terrorist attacks and civil unrest. 

The world's largest coffee chain reported that global sales at cafes open at least 13 months rose 4% in the fiscal third quarter ended June 26, well short of the 5.6% gain analysts had expected. 

The US-dominated Americas region posted 4% growth, short of analysts' call for a 6.1% gain, after rising 7% in the second quarter and 9% in the first quarter. 

Customer transactions in the Americas were flat for the quarter, when Starbucks also changed its rewards programme to remove the incentive to split orders to accumulate points faster. 

Its chief executive Howard Schultz called the US cafe results "an anomaly," and said Starbucks was confident that it could again achieve quarterly same-restaurant sales growth of 5% or more.

Starbucks rival Dunkin' Brands earlier yesterday reported soft US traffic for the latest quarter. 

Nigel Travis, chief executive of the company that owns the Dunkin' Donuts and Baskin-Robbins brands, said the industry had been struck by a "mini-malaise." 

Financial reports from Chipotle Mexican Grill and Del Frisco's Restaurant Group yesterday were also disappointing.

Starbucks, which is investing in mobile ordering and payments to serve customers faster, has been under fire from employees who say a recent move to cut hours has hurt take-home pay, morale and customer service.

Starbucks, which recently raised prices on some drinks, committed to increasing base pay for about 150,000 US baristas and managers starting from October 3. 

The company last night said its net income rose 20% to $754.1m, or 51 cents per share. Revenue was up 7%to $5.24 billion. 

Analysts had expected earnings of 49 cents per share on revenue of $5.33 billion, according to Thomson Reuters.