Despite Solid Performance, Starbucks Comps Struggle To Give Investors A Java Jolt

Starbucks Corporation SBUX is not immune to the downturn in the restaurant landscape, as its fourth-quarter blended same-store sales fell short, despite EPS and margins exceeded expectations.

Starbucks’ execution, digital revolution and expanding global footprint failed to offset the current challenging macro-economic environment. Global same-store sales of 4 percent missed the Deutsche Bank/consensus view of 4.4/4.8 percent.

The world's largest coffee chain gets major chunk of its sales from the United States, where the restaurant chains are struggling to boost top lines amid tough competition. Same-store sales in the U.S.-led Americas region rose 5 percent for the fourth quarter, in line with Deutsche Bank and consensus. In the same quarter last year, both global and U.S. comps grew 8 percent.

“While it is hard to argue with SBUXs LT strategic, operational or financial dominance, we cannot look past the near-term sales slowdown or lowered EPS outlook,” Deutsche Bank analyst Brett Levy wrote in a note.

For the first quarter, Starbucks expects EPS of $0.51–0.52 (Deutsche Bank/consensus expectations at the time of the report was $0.55).

For FY17, the company sees EPS of $2.12–$2.14 versus Deutsche Bank/consensus expectations of $2.14 and $2.16, respectively. The EPS growth at the low end of the company's long-term +15–20 percent algorithm

Further, Starbucks predicts FY17 revenue growth of 10 percent on mid-single digit growth in same store sales.

“We view SBUX as a best in class restaurant co., but we are cautious on the recent sales and earnings trends, causing us to remain Hold rated with a $59 PT,” Levy added.

Shares of Starbucks closed Thursday’s trading at $51.77. Early in Friday's morning session, Starbucks was up 3.44 percent at $53.56.