Starbucks’ sales at cafes in its U.S.-dominated region were stagnant as it grew slightly more than expected in the latest quarter.

On Thursday, the coffee giant reported stagnant store traffic at established U.S. cafés for the 2nd quarter in a row amid intense competition from upscale independent cafés, convenience stores, and fast-food chains.

Shares in the world’s biggest coffee chain fell 1.9 percent in extended-hours after stepped-up promotions failed to lure more U.S. customers, who drive the lion’s share of Starbucks profits.

U.S. & Global Sales

Same-store sales for the U.S.-dominated Americas region rose 2 percent for the second quarter ended April 1 as increased spending per visit drove the same-store sales rise since customer visits were flat.

Starbucks’ home market of the United States is its largest, with more than 14,000 stores. During the quarter, U.S. cafes offered 15 percent off new blonde espresso drinks and half-price espresso drinks during afternoon Happy Hour.

On the other hand, China is Starbucks’ biggest growth driver. Same-store sales in that 3,200-store market were up 4 percent in the second quarter, versus gains of 6 percent and 8 percent in the two prior periods.

Executives attributed the softer results in the latest quarter to a shift in the timing of Lunar New Year, saying that the business remains strong, but declined to give traffic results.

Starbucks’ global traffic was down 1 percent for the quarter, with Europe, Middle East, and Africa region falling 4 percent. Total revenue rose almost 14 percent to $6 billion.

Starbucks' quarterly net income was $660 million, or 47 cents per share, compared with $653 million, or 45 cents per share, a year ago. Excluding items, profit of 53 cents a share matched expectations. 


Philadelphia Incident

Sales results come as Starbucks is working to limit or avoid reputational damage from the arrests of two black men in a Philadelphia cafe two weeks ago. A bystander video of the incident went viral, fueling protests and calls to boycott the chain.

Starbucks apologized for the incident, which was set in motion when a manager called the police to report the two men who were waiting for a friend and had not made purchases.

It plans to close 8,000 company-owned cafes on the afternoon of May 29 for racial tolerance training.

Chief Executive Kevin Johnson said on a post-earnings call that the incident has not had an impact on U.S. same-store sales.

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