June 19, 2018

Starbucks Misses Q4 Sales Estimates, Sells Tazo To Unilever For $384 Million

04 November 2017, 12:28 | Lorenzo Hawkins

Starbucks growth in Asia falls below expectations

Starbucks tanks on revenue miss, to sell Tazo tea brand to Unilever

Despite announcing in July the decision to close all 379 Teavana brick-and-mortar outlets, Starbucks extended the brand with the February launch of Teavana Craft Iced Teas. The company sold $1.6 billion in Teavana products in the last year, and believes the business can grow to $3 billion within the next five years.

Tazo is primarily sold in grocery, convenience and mass merchant stores.

Unilever plc (ADR) notes that the acquisition price for the Tazo Tea brand represents 10 times its pro forma EBIT.

Tazo was founded in Portland, 1994 by Stash Tea co-founder Steven Smith, who sold the company to Starbucks in 1999 for $8.1 million.

Through the agreement, Unilever has agreed to buy the Tazo brand, its recipes, intellectual property and inventory for $348mn.

In turn, Starbucks will drive a single tea brand strategy and focus with its super premium tea brand, Teavana.

The transaction is expected to close in the fourth quarter, pending regulatory approval, the companies said.

On an earnings call on Thursday, Johnson shared that the company will focus on streamlining setups while investing in business in China, which is anticipated to reinforce half of growth next fiscal year. In the same period a year ago, the company reported EPS of $0.56 on revenues of $5.71 billion. Overall, the company reported net income of $788.5 million, or 54 cents per share, in the three months ending October 1. Starbucks said same-store sales would have increased 3 percent without the impact of hurricanes Harvey and Irma.

The coffee giant cut back its profit forecast on the heels of disappointing fourth quarter sales, which were impacted in part by two back-to-back hurricanes.

The chain trimmed its long-term earnings target to growth of 12% or greater per share compared with its previous estimate of 15% to 20%.

Starbucks missed analysts' revenue expectations for the quarter.

Tea sales inside of Starbucks locations are growing at double digits annually, particularly as the chain expands in Asia and other markets where tea is popular.

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