By Dhirendra Tripathi
Investing.com – Starbucks stock (NASDAQ:SBUX) traded 0.8% higher in premarket Friday amid a public outcry against the coffee brewer’s decision to raise product prices in China, its largest market outside the U.S.
The stock is down 11% in last one year.
The company has raised prices on some beverages and food products in China by 1-2 yuan (16-32 cents), the first time in over three years. It had earlier hiked prices in its home market as well, which attracted a little flak of its own.
The price increases comes just when the coffee chain was battling an online outrage after staff at one of its stores in Ciqikou, an ancient town in the Shapingba district of Chongqing city, drove out local police who were eating food at the doorstep of the store because it would “affect the brand’s image.”
The company apologized on Weibo (NASDAQ:WB), a Twitter-like service. According to Starbucks, pricing decisions are based on many factors, including operating costs. Users on Weibo called for a boycott of the retailer.
Starbucks had a tough first quarter in China. Comparable store sales in the country fell 14%, driven by a 9% decline in average ticket and a 6% decline in transactions. First quarter revenue from the market fell 2% year-on-year to $897 million. As of January 2, Starbucks had 34,317 stores worldwide. China accounted for more than one in seven of those.
Increasing cost pressure has led Starbucks to project a sharper decline in total earnings this year. The company now sees profit per share falling 4-6% for the year compared to its previous projection of no more than 4%.
The company revised its outlook earlier this month after first quarter results fell short of estimates, hit by surging costs in a tight market for labor and materials.