Starbucks to launch credit card, sell Tazo amidst disappointing sales

Published on Thursday, 2 November 2017 17:31 - Written by JOSEPH PISANI, AP Retail Writer

NEW YORK (AP) - Starbucks announced deals Thursday to sell its Tazo tea brand to Unilever and launch a credit card with Chase. But the coffee chain also reported disappointing fourth-quarter sales growth at stores around the world, and its shares fell more than 3 percent in after-hours trading.

The Seattle-based company said Unilever will pay $384 million for Tazo in a deal that is expected to be completed in the next year. Unilever, which owns Lipton, PG Tips and other tea brands, called the acquisition a "perfect strategic fit." Starbucks, which bought Tazo about 18 years ago for $8.1 million, said it wants to focus on its Teavana tea brand. Although Starbucks has been shutting down stand-alone Teavana stores, it still sells its teas in stores.

"Teavana is the brand we want to focus on exclusively," said Starbucks Corp. CEO Kevin Johnson.

The company expects to launch a Starbucks-branded credit card with Chase this winter. A prepaid card will come later. The company said both cards will allow customers to earn Starbucks rewards when they spend. These types of cards, known as a co-branded card because they feature the brand of a bank and another company, have been popular for decades since they help strengthen customer loyalty. Ride-hailing company Uber, for example, announced a card with British bank Barclays last week.Starbucks also said Thursday that fourth-quarter sales rose 2 percent at its established locations worldwide, below the 3.3 percent Wall Street analysts expected, according to FactSet.

Overall, the company reported net income of $788.5 million, or 54 cents per share, in the three months ending Oct. 1. Adjusted earnings came to 55 cents per share, matching what analysts expected.

In the same period a year ago, it reported net income of $801 million, or 54 cents per share.

The Seattle-based company said revenue slipped slightly to $5.7 billion, falling short of the $5.8 billion analysts expected.Shares of Starbucks fell $1.82 to $53.05 after the stock market closed Thursday.