Along with the news Thursday that it was selling its tea brand Tazo for $384 million, Starbucks cut its earnings estimates for 2018 and came in below sales expectations. Shares dropped 7 percent in aftermarket trading Thursday, but rebounded Friday.
CEO Kevin Johnson appeared on CNBC’s Squawk on the Street Friday, saying that Starbucks is optimistic it can exceed its new goal of same-store sales growth between 3 and 5 percent, revenue growth in the high single digits, and earnings per share growth of 12 percent or better.
“The current environment that we’re operating in and, with the work we’re doing on throughput and innovation, we’re optimistic we can exceed that,” Johnson said on the show. “This quarter alone, we have a strong holiday planned and we’re already off to a good start. We’re confident in our 2018 guidance and long-term guidance we’ve given.”
During its 2017 fiscal year, U.S. same-store sales increased 3 percent while net revenues grew 5 percent to $22.4 billion.
Johnson said in a conference call Thursday that Starbucks is tackling three important actions in support of its new long-term guidance. The brand will invest in its future, particularly in food and beverage and digital innovation and Starbucks Reserve; it will adapt its cost structure to align with the new guidance, and it will streamline and direct investments toward business and operations where growth prospects and returns are the greatest.
This strategy will include a renewed focus on Teavana, which Starbucks believes can become a more than $3 billion business, particularly through developing various channels to sell the brand.
“Channel Development is a growth engine. We are very optimistic about the future. Not only in the U.S., but then also when you look at international, we’ve got the Anheuser-Busch relationship with Teavana,” John Culver, group president of Starbucks global retail, said in a conference call. “We’re going to double down on Teavana now in channels, and launch RTD nationally. And then also we’ll be launching Teavana sachets down the aisle later this year, and so we’re excited about that, so we feel very good about the business.”