Starbucks reported weaker-than-expected quarterly earnings and revenue, with a surprise decline in same-store sales. The company also reduced its forecast for fiscal 2024, expecting continued underperformance in its cafes. CEO Laxman Narasimhan acknowledged that the results did not meet expectations but highlighted the challenges and opportunities ahead. Same-store sales fell 4% as cafe traffic declined by 6%, with shrinking sales and lower traffic reported across all regions, including the U.S. and China.
The company’s earnings per share of 68 cents were below the expected 79 cents, with revenue coming in at $8.56 billion compared to the estimated $9.13 billion. Starbucks saw fiscal second-quarter net income drop and net sales decrease by nearly 2%. For fiscal 2024, the company revised its revenue growth expectations to low single digits and adjusted its projections for global same-store sales growth to a range of low single digits to flat. Same-store sales in China are expected to decline by single digits, a shift from the prior estimate of an increase.
Starbucks attributed its waning sales to a decrease in cafe traffic, particularly from occasional customers who want more variety from their coffee choices. The company is exploring initiatives to attract these customers, including a non-loyalty app version for quicker ordering. Additionally, Starbucks is looking into overnight demand from 5 p.m. to 5 a.m., based on successful pilot tests that increased business. The chain’s lavender drinks were highlighted as a successful launch, with plans to build a $2 billion business over the next five years.
Other companies, such as McDonald’s and PepsiCo, have reported that low-income consumers are cutting back on spending and seeking deals. Starbucks acknowledged the challenges of the quarter but expressed a commitment to learning from underperformance and taking comprehensive actions to move forward. CFO Rachel Ruggeri noted that the company has identified a roadmap of strategic actions. Narasimhan also highlighted the company’s revised supply-chain cost savings forecast of $4 billion over the next four years, an increase from the previous estimate of $3 billion over three years.
Despite the disappointing quarterly results, Starbucks remains focused on addressing challenges and capitalizing on opportunities for growth. The company is prioritizing initiatives to attract new customers, enhance the customer experience, and drive revenue growth. With a strategic roadmap in place and a commitment to cost savings, Starbucks aims to improve sales performance and enhance its position in the market over the coming quarters. Narasimhan emphasized the resilience and potential of the Starbucks brand, highlighting ongoing efforts to adapt to changing consumer preferences and strengthen the company’s financial performance.
