What Matters in Thursday’s Starbucks Earnings Report

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After markets close Thursday, Starbucks Corp. (NASDAQ: SBUX) is set to report fiscal second-quarter results. The early April incident in a Philadelphia store that resulted in the arrests (and later dropping of the charges) of two African-American men will receive special attention — as it should — but there are other issues that investors will also want to hear about.

Analysts are looking for earnings of $0.53 per share and revenues of $5.93 billion, which would be up from the $0.45 per share and $5.29 billion reported in the same quarter last year.

A key metric for the company will be same-store sales growth. Global same-store sales are expected to rise by 1.8%, including a rise of 2.3% in Asia and a 1.8% hike in the United States. The expectation for the United States is lower than actual growth in each of the past two quarters. U.S. same-store sales rose 3% in the fourth fiscal quarter of 2017 and by 2% last quarter. A miss here would be a big deal.

Same-store sales growth in China also rose slightly in the past two quarters, from 6% to 7%. Continued growth in China as the company continues to open new stores in the country is critical.

The incident in Philadelphia has hurt U.S. consumers’ image of the company. A “Buzz score” survey conducted by YouGov showed a 21-point drop in the number of consumers who had last heard something good about the company.

Starbucks already has announced that it will close all its more than 8,000 U.S. stores on the afternoon of May 29 to conduct racial-bias training, but expect more questions on the conference call about other steps the company plans to take to address the issue. Starbucks’ public image needs more than a little buffing to recover, and there also could be repercussions to top-line and bottom-line results.

Starbucks shares traded up about 1.8% Thursday morning, at $58.78 in a 52-week range of $52.58 to $64.87. The 12-month consensus price target on the stock is $63.85.

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