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Starbucks shares fall after weaker-than-expected 2020 forecast

Key Points
  • Starbucks CFO Pat Grismer said at Goldman Sachs' Global Retailing Conference that one-time tax benefits in 2019 are a headwind for fiscal 2020 earnings.
  • The company also repurchased $2 billion in shares in fiscal 2019, instead of in fiscal 2020.
  • Starbucks also reiterated its guidance for fiscal 2019, expecting earnings per share in a range of $2.80 to $2.82.
Kevin Johnson, CEO, Starbucks
Scott Mlyn | CNBC

Starbucks released Wednesday a weaker-than-expected forecast for its fiscal 2020 earnings.

Shares of the company slid more than 3% in premarket trading. The coffee chain's stock, valued at $116 billion, is up 50% so far this year, as of Tuesday's close.

Starbucks said that it expects fiscal 2020 earnings per share to be below its "ongoing growth model of 10%."

The company released the outlook in a slideshow for a presentation by CFO Pat Grismer at Goldman Sachs' Global Retailing Conference.

Grismer said that one-time tax benefits realized in fiscal 2019 will be a significant headwind to earnings growth in fiscal 2020. He also said that Starbucks decided to purchase about $2 billion worth of shares in fiscal 2019 instead of fiscal 2020.

"But again, I want to reinforce that our growth-at-scale agenda is delivering against our expectations," Grismer said. "I would say that we're firing on all cylinders from an operating performance perspective with the focus and discipline necessary to drive growth at scale for a company like Starbucks and our long-term double-digit EPS growth model is fully intact."

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After the company crushed third quarter earnings estimates and raised its 2019 outlook in July, some investors might be taken aback by the weaker outlook for 2020. Starbucks had previously said at its investor day in December that it expected earnings per share growth of at least 13% in 2020.

"While calling out EPS adjustments like this can raise questions among investors, I'm encouraged that the core operating business targets (revenue growth 7%-9%, operating income 8%-10%) are intact, and still see several paths to at least high-single-digit EPS growth in FY20," Morningstar analyst RJ Hottovy said.

Starbucks also reiterated its guidance for fiscal 2019, expecting earnings per share in a range of $2.80 to $2.82.

Despite market concerns about a recession in the near future, CEO Kevin Johnson said on CNBC's "Mad Money" in August that Starbucks has not seen any signs of an economic slowdown in the U.S.

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