Daily Management Review

Coronavirus Forced Store Closure Results In Falloff Global Sales For Starbucks


Coronavirus Forced Store Closure Results In Falloff Global Sales For Starbucks
Shutdowns of its stores because of coronavirus pandemic related restrictions has resulted a a fall in the global sales of Starbucks in the first three months of 2020. In the current quarter the business environment is likely to deteriorate further before leveling out later this summer, warned the Seattle-based coffee giant. The company added that the recovery will continue into 2021.
However, encouraging signs were available, said the company’s executives.
“I think we emerge from this strengthening the brand and strengthening the connection we have with customers,” the company’s president told a conference call of investors.
There was a drop of 10 per cent globally in the period between January and March for the company’s same-store sales – or sales at stores open for at least a year, Starbucks said.
The company said while about 98 per cent of its stores in China have reopened even though with a reduced seating capacity and limited hours, more than 75 per cent of the stores of the company in Japan, the UK and Canada are currently closed, Starbucks said.
A “substantial recovery” in China is expected by the company by September 30 when its fiscal year ends, Johnson said. China is the second largest market for the company. 
In its home country of the United States, Starbucks has been forced to temporarily close more than half its 8,000 company-owned stores. It now plans to reopen about 90 per cent of the closed stores by early June with certain modifications. The company said that drive-through and delivery will be offered at some of its stores while contactless pickup options will be established at its other stores, said the company’s chief operating officer Roz Brewer.
Brewer said that while the company will reopen thirty stores next week and their cafes will also open, seating will not be provided at the stores. The reopening of the stores will take into consideration local government restrictions, infection curves and other measures, she said.
Starbucks has spent heavily to help employees navigate the crisis.
“We continue to navigate this dynamic situation — which we believe is temporary — and are confident that Starbucks will emerge from this global crisis even stronger than before," Starbucks CEO Kevin Johnson said in a tweet.
All of its employees in the US and Canada will be paid salaries up until May 3 irrespective of whether they are working or not, the company has committed and those employees would come to work will paid an additional $3 per hour as a premium.
A million free coffees to frontline health and safety workers have also been provided by Starbucks.
There was a 5 per cent drop in the revenues of the company in its fiscal second quarter which came in at $6 billion. According to FactSet, the estimate of the number by analyst was at $5.9 billion.
The earning of the company during the quarter was at $328.4 million which was 50.5 per cent lower year on year.