Starbucks’ Earnings Are Today. Here’s What to Expect. - Barron's

Starbucks stock rose 36.5% in 2019. Photograph by Saul Loeb/AFP via Getty Images

Worry over the coronavirus is likely to weigh heavily on Starbucks when it reports earnings after the bell Tuesday.

Wall Street analysts have been generally upbeat on Starbucks (ticker: SBUX ) in recent quarters. Sales have been growing steadily as the coffee chain has improved its mobile ordering and offered new seasonal beverages such as Irish Cream Cold Brew, launched for the year-end holidays. The company even increased sales in China despite competition from Luckin Coffee (LK).

Starbucks shares rose in turn, climbing 36.5% in 2019 and continuing their surge into the new year.

Starbucks’ fiscal first-quarter results are expected to reflect those gains, but Wall Street will still want to know how the coronavirus outbreak will affect coming quarters. Shares fell 3% in Monday trading following reports over the weekend that Starbucks closed its stores in China’s Hubei province in response to the virus.

“We estimate that Starbucks, with its company operated model in China, has the greatest exposure as measured by percentage of WW system revenues and operating income,” Guggenheim analyst Matthew DiFrisco said in a note Monday. McDonald’s (MCD) and Domino’s (DPZ) could also be negatively affected, he said.

Starbucks had more than 4,000 stores in China as of Sept. 30, representing just over a quarter of its total company-operated locations, and thought to account for roughly 10% of total sales, according to DiFrisco.

Analysts surveyed by FactSet expect Starbucks to report earnings of $0.76 a share from sales of $7.1 billion for its fiscal first quarter. The consensus view is that sales at stores open at least a year will rise by about 4.4%

Even without the coronavirus outbreak, China would have been a key area of interest. Analysts will want to see whether comparable-store sales continued there, and will be eager to hear how receptive Chinese consumers have been to delivery and mobile ordering.

Before the coronavirus outbreak intensified, analysts at KeyBanc Capital Markets were bullish on China. They noted that customers there were at least twice as likely to have a digital relationship with the brand than their U.S. counterparts.

Write to Carleton English at carleton.english@dowjones.com

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