Starbucks maps out China for its next investment

The chief executive of Starbucks Corp’s hinted that the world’s largest coffee chain is embarking on a long-term investment in China – this is coming amid fears the growth of the firm in the U.S market is declining.

The new CEO of Starbucks, Kevin Johnson succeeded the co-founder of the tea chain, Howard Schultz as the chief executive in April. Johnson is faced with the task of devising new and feasible ways to meet the demands of the Wall Street.

The urgent need of Johnson’s mandate was re-emphasized on Thursday when the firm published its quarterly profit that suits the estimates by analysts. The tea chain company balanced expectations for the present quarter as it tussles with softness in the U.S restaurant and retail industries. The company indicated that it would shut down its 3379 stores in Teavana.

Shares of the firm which investors often publish when it doesn’t go beyond Wall Street’s expectations turned out 5.5 percent to $56.24 in after-hours sales.

Starbuck’s first financial report under Johnson

Shortly after Starbucks declared its intention to buy the remaining part of its East China business from its partners for $1.3 billion, the financial report was made available.

The financial report displayed that the firm’s net income dropped 8.3 percent to $691.6 million for the third quarter closed July 2. Apart from items, the firm got 55 cents per share which meet the estimates of analysts.

However, the restaurants in U.S struggled for market share, battling with new non-traditional competitors like the convenience stores and meal kit sellers.

Sales recorded at the firm’s mainstay in the U.S cafes rose 5 percent in the last quarter. Three straight quarters characterized by decline was turned positive due to its recent traffic.

From an initial lowered forecast of $2.06 to $2.10, executives still cut the firm’s earning per share at the end of the year to fall between $1.96 to $1.97 following the decline in sales in the U.S same-store that have rolled into this month.

According to Johnson, Starbucks think is a wise thing to do. The sales recorded from the same-stores in China went up 7 percent in the previous quarter. The company’s same-store in China is about 2,800 stores in 130 cities. However, about $974.8 million part of the company’s operating income was raised in the 16,302 cafes in the Americas region where Starbucks dominate. On the other hand, $223.8 million was raised from the 7,183 cafes in the China/Asia Pacific region.

What the forthcoming deal holds

Johnson said that cash deal in China would give Starbuck the ownership of 1,300 stores in Zhejiang, Jiangsu and Shanghai regions. He added that the deal is part of the firm’s long game in the country that stands out as its fastest growing market beyond the U.S. The company is just getting started as its deal will expand the growth of Starbucks in China.

Starbucks hinted that many stores will be closed while Teavana branded will still be on sale in Starbucks stores. It could be recalled that Starbucks bought Teavana for the sum of $620 million in 2012.