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Shares of Starbucks were trading down nearly 5 percent Friday after the coffee chain posted another quarter of disappointing sales growth as holiday offerings failed to draw in customers.
Same-store sales came up short in all of the company's regions, Starbucks said late Thursday. However, growth in China was robust, with same-store sales rising 6 percent on the back of a 6 percent increase in transactions.
"China grew revenues 30 percent in Q1, with the strategic acquisition of East China positioning us to accelerate our growth in the key China market," Kevin Johnson, president and CEO, said in a statement.
In the quarter ended Dec. 31, Starbucks said net income rose to $2.25 billion, or $1.57 per share, from $751.8 million, or 51 cents per share, a year ago.
Excluding items, Starbucks earned 58 cents per share in the latest period, which was a penny better than analysts were expecting. Not included in that number is a 7 cents per share benefit from changes in the U.S. tax law.
The company said that global same-store sales rose 2 percent in the quarter, however forecasts had called for same-store sales to be up 3 percent, according to StreetAccount. This is the fifth quarter in a row that global same-store sales have been positive, but the company has missed analyst expectations in this metric by 70 basis points or more.
In the U.S., same-store sales grew 2 percent driven by a 2 percent increase in the average check size.
Johnson attributed disappointing U.S. sales to weak sales of holiday beverages, merchandise and gift cards.
"Holiday [limited time offers] and merchandise did not resonate with out customers as planned," he said on an earnings conference call Thursday. "To be more specific, in Q1, our food comp was 2 percent. Our core beverage comp, excluding holiday limited time offers was 1 percent. And together our holiday LTO and lobby items had a negative impact of over 1 point of comp."
During the holidays, Starbucks had offered seasonal flavors such as an Eggnog Latte and Chestnut Praline Chai Tea Latte, among others.
Starbucks hopes to bolster sales in the U.S. by luring in customers in the afternoon with discounts and promotions. It also plans on continuing to leverage mobile ordering and digital marketing to increase the number of times consumers visit the coffee shop.
Starbucks said it added 1.4 million Starbucks Rewards members in the U.S. in the last quarter, raising its total number of members to 14.2 million.
Same-store sales in Europe, the Middle East and Africa also fell short of expectations, down 1 percent in the quarter. Analysts had expected same-store sales to be up 1.6 percent.
While same-store sales in China were strong, the China and Asia Pacific segment saw same-store sales growth of 1 percent. CFO Scott Maw said that sales in Japan were hurt by weak sales around Frappuccino offerings.
Starbucks hit the reset button in November on its targets for same-store sales and earnings growth. Johnson said at the time that he was optimistic about Starbucks' ability to meet and exceed the new targets.
On Thursday, the coffee chain confirmed that investors can expect annual global same-store sales of between 3 and 5 percent growth. However, the company said shareholders should expect same-store sales growth near the low end of this range.
In addition, the company said that it now expects adjusted earnings in the range of $2.48 to $2.53 per share for the full year, up from the previously forecast range of $2.30 to $2.33. This new projection includes the impact of the new U.S. tax law and reinvestments.
Correction: A previous version of this story misstated the earnings forecast.