Starbucks Corp. plans to regain growth momentum in part by expanding its digital business and footprint in China after lowering its projections for global comparable store sales for the third quarter of fiscal 2018 and full-year adjusted earnings per share.

Speaking June 19 at the Oppenheimer Consumer Conference, CFO Scott Maw said the company expected 1% growth in comparable sales in the fiscal third quarter and lowered the adjusted EPS estimate for the fiscal year to a range of $2.39 to $2.43, down from the previous target of $2.48 to $2.53.

Also at the conference, CEO Kevin Johnson cited a slump in sales of afternoon beverages, particularly blended Frappuccino drinks, as well as flat growth in China and the effects of the April arrest of two black men in one of the global coffee giant's Philadelphia stores, which spurred a backlash against the company. The incident prompted Starbucks to close about 8,000 of its stores May 29 for anti-bias training, and delayed the planned rollout of a spring and summer marketing campaign.

"In this last quarter, we had an unplanned initiative related to the incident in Philadelphia that culminated in us closing our stores on May 29. And with that unplanned incident, it is not an excuse for the fact that we're looking to post a 1% comp globally this quarter," Johnson said. "In fact, I expect better. Our shareholders deserve better, and this leadership team and I are committed to fix this."

Redirected traffic

Starbucks is also slowing its planned store openings and accelerating some closures in fiscal 2019. The company will close about 150 underperforming stores in saturated U.S. markets and reduce expansion by about 125 stores, particularly in franchise locations.

Johnson said during a follow-up conference call with investors later on June 19: "The criteria I looked at was negative comp and negative total contribution margins. So these are probably not stores that get relocated or replaced. You close them and there's other stores in the proximity, and the traffic goes to those other stores."

To spur growth, Starbucks is looking to new digital initiatives which it expects to contribute 1% to 2% for comparable sales in the next fiscal year. Customers who do not participate in the company's rewards program but pay with credit or debit cards will be able to earn rewards and represent new opportunities for digital growth.

Starbucks has added 5 million digitally registered customers in the U.S. in the last 90 days, according to Johnson. This was achieved by opening up the mobile order and pay service to non-rewards customers, requiring email addresses for Wi-Fi access and revamping happy hour as an opt-in program.

Meanwhile, the coffee chain's licensing deal with Nestlé SA will help fund expansion in the U.S. and China, where Starbucks plans to open about 600 stores per year through 2022.

Johnson also pointed to potential operating efficiencies to cut general and administrative costs. The company is working with a consultant to that end.

Starbucks will return about $25 billion in cash to shareholders through buybacks and dividends through fiscal 2020, according to a June 19 statement released by the company. That is $10 billion more than the target announced in November 2017.

In addition, the company's board approved an increase in its regular quarterly dividend to 36 cents per share, up 20% from the previous 30 cents per share. It will be payable Aug. 24 to shareholders of record as of Aug. 9.

The announcements came just a week ahead of the departure of Howard Schultz, who will step down as executive chairman of the Starbucks board June 26.

Starbucks plans to report its third-quarter earnings July 26.