Q1 Earnings Below Expectations... Stock Prices Plunge
Prolonged Palestine War Hits US Companies
The global coffee chain Starbucks is taking a direct hit from the 'anti-Israel boycott movement.'
Starbucks announced on the 30th (local time) that it recorded sales of $8.56 billion (11.8727 trillion KRW) and net earnings of $0.68 per share in the first quarter.
This represents about a 2% decrease compared to the same period last year and falls short of the $9.13 billion estimated by the market research firm LSEG. This is an example of an 'earning shock,' a phenomenon where a company announces results below expectations, affecting its stock price. This is the first time Starbucks' quarterly sales have declined since 2020 during the COVID-19 pandemic.
Net income also remained at $772.4 million, significantly below Wall Street's forecast of $983 million. Consequently, Starbucks lowered its 2024 fiscal year sales growth forecast from 7-10% to below 5%, and projected net income to remain at a similar level to last year.
Same-store sales also fell 4% compared to a year ago, missing the expected 1% increase. Same-store sales in the largest market, the United States, declined by 3%, and sales in China dropped by 11%.
Rachel Ruggeri, Chief Financial Officer (CFO), analyzed, "Colder-than-usual weather reduced store visits, and the Middle East conflict compounded the impact, hurting quarterly results." Starbucks' stock price rose 0.18% during regular trading on the New York Stock Exchange that day but plunged 12% in after-hours trading following the earnings announcement. However, Starbucks expects performance to improve starting in the fourth quarter.
This is because the prolonged war in the Gaza Strip, Palestine, is threatening investment attraction projects by American franchise companies such as KFC and Pizza Hut in Asia. Boycott movements against American products are occurring in Muslim-majority regions such as Indonesia and Malaysia. QSR Brands, which operates KFC, recently temporarily closed 108 stores in Malaysia.
In particular, since it became known that Starbucks' founder Howard Schultz is of Israeli descent, the company has long been viewed as a Jewish nationalist 'Zionism' enterprise. Starbucks has repeatedly clarified that this is a misunderstanding, but during this war, claims that it supports Israel and provides funding to the Israeli government and military have spread, making it a focal target of the boycott movement.
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