Starbucks expects a revenue loss as high as $3.2 billion for Q3 2020 due to the COVID-19 pandemic, according to a letter to shareholders seen by CNBC. However, the company expects weekly cash flow to become positive by the end of June, and it is expanding its drive-thru and curbside pickup options to enhance operations as customers shift to contactless options.
Same-store sales fell 43% in May during the reopening process, though the drop shrank to just 32% during the last week of the month. Starbucks already has reopened 95% of its stores; most of those that are still closed are located in the hard-hit New York City area.
Starbucks expects international same-store sales for fiscal 2020 as a whole to fall 10% to 20%, with Q4 same-store sales remaining flat in China and negative in the U.S. Chinese same-store sales were down 14% year-over-year during the first week of June, an improvement from the 21% decline in May.
The retailer plans to continue growing despite these setbacks. Starbucks opened 57 net new stores in China during April and May, and it expects to open 300 net new stores in the Americas during fiscal 2020. However, the company also may shutter as many as 400 company-owned locations over the next 18 months in order to accelerate changes to its U.S. fleet that will put a greater emphasis on online ordering.
Changes include the renovation of some cafés to add a separate counter for mobile order pickup by both shoppers and Uber Eats couriers. Starbucks also plans to open pickup-only stores in dense markets including New York, Chicago and San Francisco.
“Starbucks stores have always been known as the ’third place,’ a welcoming place outside of our home and work where we connect over a cup of coffee,” said Kevin Johnson, CEO of Starbucks in a statement. “As we navigate through the COVID-19 crisis, we are accelerating our store transformation plans to address the realities of the current situation, while still providing a safe, familiar and convenient experience for our customers.”
Starbucks is expected to report its official Q3 2020 results on July 28.