- Starbucks plans to close more than 150 company-owned stores next year and decelerate the number of licensed store openings.
- The coffee giant has been working to grow the number of people who use its loyalty program and mobile app.
- The company is now throwing more support behind its refreshment category which includes Teavana branded iced teas and Refreshers.
Shares of Starbucks sank Tuesday after the coffee chain lowered its third-quarter sales forecast and said it would scale back store growth.
The company said it would slow the number of licensed stores it opens and close underperforming company-operated locations in densely populated areas. The company historically closes about 50 of these stores annually, however in 2019 it expects to close about 150 stores.
"We know that we drive more shareholder value in a company-owned store … than a licensed store," CEO Kevin Johnson said during a presentation at the Oppenheimer Annual Consumer Conference in Boston on Tuesday.
Separately, Starbucks will reduce the number of new licensed stores in 2019 by about 100 stores, Johnson said. The company will continue to explore strategic options to license company-operated stores in other "appropriate markets," however.
In addition, Starbucks said that it expects to return about $25 billion in cash to shareholders in the form of share buybacks and dividends through 2020. This is a $10 billion increase from the forecast the company set last November. The company will hike its quarterly dividend by 20 percent.
Starbucks anticipates global same-store sales growth in the third quarter to be up 1 percent.
Shares of the coffee chain were down as much as 3 percent after the bell Tuesday. The stock is flat year-to-date, but down nearly 6 percent over the past 12 months.
"We must move faster to address the more rapidly changing preferences and needs of our customers," Johnson said in a statement Tuesday. "Over the past year we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value drivers which serve as the foundation to re-accelerate growth and create long-term shareholder value."
In the most recent quarter, Starbucks topped same-store sales expectations, but traffic remained flat. The beat had been viewed positively as it followed five straight quarters of misses.
The coffee giant has been working on a number of initiatives to turn around these weak sales, including offering more cold beverages, which are now 50 percent of its business, and new lunch items to draw people into its cafes in the afternoon.
Starbucks' blended Frappuccino beverages, which were once a major driver of sales growth for the company, are no longer resonating with customers. In 2015, Frappuccinos were 14 percent of Starbucks revenue. However, year-to-date Frappuccino sales are down 3 percent and now account for only 11 percent of the company's revenue.
The company is now throwing more support behind its refreshment category which includes Teavana branded iced teas and "Refreshers," a line of fruity, lightly caffeinated drinks.
This category has grown to 12 percent of Starbucks' revenue in the year-to-date period, up from 11 percent in 2015. Since January, sales are up 14 percent from the same period a year ago.
In addition, Starbucks has been working to grow the number of people who use its loyalty program and mobile app. In the last quarter, these customers accounted for 39 percent of sales at company-owned stores in the U.S., according to Starbucks.
"The number one thing to unlock comp growth in the U.S. is expanding the number of digital relationships we have," Johnson said during the presentation Tuesday.
Since April, Starbucks has added 5 million new digital customers and 2 million active Starbucks Rewards members, up 13 percent from a year ago.
Johnson became CEO April 2017, succeeding Howard Schultz, who shifted his focus to the company's Roastery and Reserve Bars and took the title of executive chairman. Earlier this month, Schultz said he would be stepping away from the company completely, effective June 26.
Since taking over as CEO, Johnson has labored in Schultz's shadow. Despite leaving the top post more than a year ago, Schultz is still considered the face of the brand and often mistakenly referred to as CEO. As he plans his exit, some investors expect there will be a void after he is gone.
Tune in: Starbucks President and CEO Kevin Johnson will be on "Squawk on the Street" at 9 a.m. ET Wednesday.