Starbucks Corporation (SBUX) Dumps Teavana, Doubles Down in China

Starbucks Corporation (NASDAQ: SBUX) failed to wow Wall Street on Thursday when the company reported in-line earnings and a slight revenue miss in its fiscal third quarter. As Starbucks continues to fine-tune its mobile ordering system, it is also making moves to increase its presence in China.

Starbucks reported earnings of 55 cents per share, in line with consensus analyst estimates. However, record third-quarter revenue of $5.66 billion came up just shy of consensus forecasts of $5.75 billion.

Comparable store sales growth of 4 percent also came up short of analyst expectations of 4.9 percent growth. U.S. comparable store sales were up 5 percent. China/Asia-Pacific comparable store sales increased just 1 percent on the quarter, but China’s 7 percent growth was a bright spot.

“Continued focus on execution against our strategic priorities enabled us to gain share and positions us well for the future,” CEO Kevin Johnson says.

One of those strategic priorities is the planned closure of all of its 379 Teavana retail stores, which the company said have been consistently underperforming.

Earlier in the day, Starbucks announced a $1.3 billion buyout of joint venture partners’ 50 percent ownership stake of China’s Shanghai Starbucks Coffee Corp. The buyout, the largest acquisition in company history, will give Starbucks 100 percent ownership of 1,300 Starbucks stores throughout China.

In June, KeyBanc analyst Chris O’Cull said China is a major growth opportunity for Starbucks. “Taken in conjunction with underappreciated growth from Starbucks’s CAP (China/Asia-Pacific) and Channel segments as well as expanded share repurchase activity, SBUX should be able to successfully generate EPS growth of 15 percent going forward,” O’Cull wrote. “We believe that magnitude of growth should at least sustain the shares’ valuation multiple, rendering current prices an attractive level to add.”

Despite issues with its mobile ordering system overcrowding popular restaurants, Starbucks reported that mobile ordering rose to 30 percent of total U.S. transactions in company-operated stores in the third quarter. Starbucks Rewards membership also grew…

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