Starbucks Corp. saw shares dip nearly 4% to $93.03 on Sept. 4 after it gave lower-than-expected earnings forecast for fiscal 2020.
The coffee chain expects EPS for 2020 to be "below our ongoing growth model of at least 10%," compared with the 16% year-over-year growth it is expecting for the current fiscal year, CFO Pat Grismer told analysts at Goldman Sachs' 2019 Global Retailing Conference.
Starbucks previously said during its investor day in December 2018 that it expects to yield EPS growth of at least 13% in 2020.
Grismer said the tax benefits that the company realized in fiscal 2019 will slow earnings growth in 2020, along with about $2 billion in share repurchases that it elected to execute a year in advance.
The executive said Starbucks decided to pull its share repurchases a year earlier because of the company's "rapidly appreciating share price," which grew more than 80% in 2018, thereby preserving its expectations through an EPS growth contribution to its planned buyback.
For the third quarter ended June 30, the Seattle-based company reported a 26% year-over-year jump in adjusted EPS to 78 cents, surpassing the S&P Global Market Intelligence estimate of 73 cents. At the time, Starbucks also raised its adjusted EPS forecast for the year to between $2.80 and $2.82, from the prior outlook of $2.75 to $2.79.
At the midpoint of the company's current guidance range, Starbucks' projected EPS for 2020 is approximately $3.09, lower than the Market Intelligence estimate of $3.12.
"But again, I want to reinforce that our growth at scale agenda is delivering against our expectations," Grismer also said. "I would say that we're firing on all cylinders from an operating performance perspective with the focus and discipline necessary to drive growth at scale for a company like Starbucks, and our long-term double-digit EPS growth model is fully intact."
Starbucks is scheduled to release its fourth quarter and full year 2019 earnings results Oct. 30.
