Starbucks last night trimmed its profit forecast and posted disappointing quarterly sales, squeezed by competitors ranging from boutique coffee sellers like Intelligentsia and lower-price rivals including McDonald's.
Investors used to Starbucks beating expectations and raising profit outlooks sent shares down 3.4% in extended trading on Wall Street.
Hurricanes Harvey and Irma battered same-store sales at more than 1,100 cafes in the US, which still accounts for the lion's share of operating income.
Sales at US cafes were down 2% for the quarter that ended October 1. Excluding the hurricane impacts, they would have been up 3% - still just short of analysts' estimate.
During a conference call, executives also pegged the same-store sales weakness to slower service as workers juggled mobile ordering, complex menus and other issues as well as soft restaurant foot traffic.
The Seattle-based coffee chain cut its long-term earnings target to growth of 12% or greater per share from its prior call for growth of 15-20%.
Fourth-quarter revenue missed Wall Street's target after sales at established global cafes gained 2%, less than analysts' average target of 3.2%.
Starbucks, which is cutting costs, streamlining menus and selling or shuttering some businesses, also announced a deal to sell its Tazo tea brand to Unilever for $384m.
Analysts have warned that Starbucks is being "middled" by rising competition on the value and quality fronts and that it must bolster sales of higher-priced specialty drinks and breakfast sandwiches.
CEO Kevin Johnson told Reuters in an interview that there was no evidence Starbucks was being hit by competition. "We are not going to be squeezed in the middle," he said.
US convenience stores and fast-food chains are improving quality and pricing aggressively.
McDonald's recently expanded its McCafe menu with new macchiatos and lattes. Meanwhile, Dunkin' Brands Group is offering special deals on breakfast sandwiches in its bid to win breakfast.
At the same time, upscale craft coffee rivals like Nestle's Blue Bottle and Intelligentsia are opening more shops.
The company said last night that its total net revenue decreased 0.2% to $5.70 billion, compared with analysts' revenue target of $5.80 billion, according to Thomson Reuters.
Net income attributable to the company fell 1.6% to $788.5m. Excluding items, it earned 55 cents per share, in line with Wall Street targets.
The company said results should get a bump from its pending $1.3 billion purchase of the remaining 50% of its East China business from joint venture partners.
That deal will give Starbucks ownership in 1,300 cafes in the area that includes Shanghai.
Same-store sales from China were up 8% in the latest quarter, but the broader China and Asia Pacific region posted a rise of 2%, versus expectations of 3.2%.
