Starbucks Shoots Down China Exit Rumors: 'We See Significant Long-Term Potential'

Starbucks (SBUX) said late Monday it is not considering a full sale of its China business, disputing a report by Beijing-based media group Caixin Global.

Earlier in the day, Caixin Global, citing anonymous sources reported that Starbucks was considering a full sale of its China business and held preliminary talks with dozens of potential investors, including Hillhouse Capital, FountainVest Partners, and Trustar Capital. Shares rose by under 1% in extended trading.

While denying the report, the U.S. coffee chain told Bloomberg News, "We see significant long-term potential in the market and are evaluating the best ways to capture future growth opportunities."

The news about Starbucks exploring options and courting investors has been doing the rounds in the U.S. media for some time. Following those reports, CEO Brian Niccol confirmed the talks and told the Financial Times that investors had shown "a lot of interest" in acquiring a stake in Starbucks' China business.

Starbucks, which opened its first cafe in China in 1999, has faced rising competition from lower-priced local rivals like Luckin and Cotti in recent years. Globally, the company is also navigating headwinds as consumers pull back on discretionary spending due to frail economic conditions in several places.

Starbucks' revenue from China has fallen from $3.7 billion in 2021 to $3 billion last year, despite opening hundreds of new stores. Earlier this month, Starbucks cut prices on some of its beverages in China.

On Stocktwits, the retail sentiment for the company was 'bearish,' unchanged from the previous day. Starbucks shares are up 1.2% year-to-date.

The plan to offload a stake in the business is part of a business revival strategy under Niccol, who took over as CEO in October last year.

Starbucks has eliminated over 1,000 jobs and is implementing a strategic overhaul that includes redesigning store layouts and integrating technology into barista workflows.

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