Starbucks brewed $6 billion in sales during its fiscal second quarter, but saw its operating margin shrink amid business changes in China and investments in its workforce.
The Seattle-based coffee giant said Thursday that earnings in the quarter ended April 1 were $660.1 million, or 47 cents per share, up 4 percent from the year-earlier period, but short of the Wall Street consensus estimate of 53 cents. Starbucks sales in the quarter were $6 billion, up 14 percent.
Sales at company-owned stores open 13 months or longer increased 2 percent in the quarter, with comparable sales in its fast-growing China business up 4 percent.
Starbucks said it added 468 stores in the quarter, bringing the total to 28,209. It also closed 298 Teavana stores.
Starbucks' operating margin decreased to 15.6 percent in the quarter. Starbucks pinned the decline on restructuring and impairment costs; a changing lineup of food sales, particularly in its Americas business segment; increased investments in employees; and its purchase of the outstanding interest in its East China business from partners in a joint venture there. Starbucks' margin in the same quarter last year was 18.8 percent.
Chief financial officer Scott Maw said in a statement that the company has plans in place to "improve profitability" during the second half of the fiscal year, including savings related to cost of goods, waste and labor.
"We are continuing to invest in our business � strategically and with a 'long game' mentality � while at the same time taking decisive near-term action to maximize our brand portfolio and ensure that we continue to deliver outsized returns to our shareholders in the quarters and years ahead," Maw said.
Starbucks said share repurchases and dividends returned $2 billion to shareholders during the quarter.
The Seattle-based coffee company has come under intense scrutiny in recent weeks after a Philadelphia store manager called police to remove two black men who had not made a purchase while waiting to meet an associate. The men were arrested for trespassing and released without charge. Starbucks apologized and pledged to close more than 8,000 company-owned U.S. stores for the afternoon of May 29 to provide more than 175,000 employees with racial-bias training.
The company did not provide an estimate of the cost of the training, including any anticipated lost sales, in its earnings announcement.
The company maintained its financial targets for the year, including:
Net revenue growth of 9 to 11 percent
Per-share earnings in the range of $3.32 to $3.36
The opening of 2,300 net new stores
