Starbucks Warns Of Slower Profit Growth In 2020

(RTTNews) - Shares of Starbucks Corp. (SBUX) slipped Wednesday after the coffee giant's executives warned that 2020 profit growth will be below its target.

CFO Pat Grismer said at the Goldman Sachs Global Retailing Conference the company expects fiscal 2020 earnings-per-share growth to be below its long-term growth target of "at least 10%." The current Reuters consensus for fiscal 2020 EPS of $3.12 indicates a growth of 10.6% over the fiscal 2019 consensus of $2.82.

Grismer said one "very significant headwind" to 2020 EPS growth is the effective tax rate, given the one-time nature of the tax benefit realized in 2019.

The company also pulled forward $2 billion share repurchases planned for next fiscal year to this year.

"So in the context of a rapidly appreciating share price and given that we have the liquidity to do it, we pulled forward those share repurchases, and we're able to preserve what we had expected by way of an EPS growth contribution to or from the share repurchases, net of the associated interest expense," Grismer said at the Goldman conference."

Less than a year ago, Grismer had said that the company "anticipated FY20 and FY21 to average 13% EPS growth with slightly more growth in FY20, and slightly less in FY21."

At a Starbucks investor gathering in December, Chief Financial Officer Patrick Grismer said that, as a result of the benefit of share repurchases and efforts to cut general and administrative expenses, he expected EPS growth of "at least 13%" on average for 2020 and 2021.