Starbucks Quarterly profit and revenue reported on Tuesday fell short of expectations due to an unexpected drop in same-store sales.
The coffee chain also slashed its fiscal 2024 earnings and revenue forecasts, expecting its cafes to continue to underperform for several more quarters.
The company’s shares fell 12% in after-hours trading.
“In a challenging environment, this quarter’s results do not reflect the strength of our brands, our capabilities or future opportunities,” Chief Executive Laxman Narasimhan said in a statement. “It Not what we expected, but we understand the specific challenges and opportunities that lie ahead of us. “
The company’s same-store sales fell 4% as cafe traffic fell 6% in the quarter. Wall Street expects same-store sales to grow 1%, according to StreetAccount estimates.
Across all regions, Starbucks reported shrinking same-store sales and lower foot traffic.
In the United States, same-store sales fell 3% and customer traffic fell 7%. That marked a troubled second quarter for the company’s domestic market. Last quarter, it faced a backlash after executives blamed sluggish sales on a “misunderstanding” of the company’s stance on Israel.
Starbucks’ international unit reported a 6% decline in same-store sales as both average tickets and transaction volume fell. In China, Starbucks’ second largest market, same-store sales fell 11%, affected by an 8% drop in average ticket prices.
“In this environment, many customers are becoming more selective about where and how they choose to spend their money,” Narasimhan told analysts on the company’s conference call.
What’s this company reports Compared to Wall Street expectations, according to a survey of analysts by LSEG:
- Earnings per share: Adjusted 68 cents, expected 79 cents
- income: $8.56 billion vs. $9.13 billion expected
The coffee giant reported second-quarter net income attributable to the company of $772.4 million, or 68 cents a share, down from $908.3 million, or 79 cents a share, in the same period last year.
net sales It fell nearly 2% to $8.56 billion.
Starbucks currently expects revenue growth in fiscal 2024 to remain in the low single digits, down from the 7% to 10% previously forecast. The company also lowered its global and U.S. same-store sales growth forecast to low single digits to flat from the previous forecast of 4% to 6%. Same-store sales in China are expected to fall by single digits, below previous expectations for single-digit growth.
Starbucks also currently expects earnings per share growth to remain in the flat to low single-digit range. The company previously forecast profit growth of 15% to 20% in fiscal 2024.
The company forecast sales will begin to improve in the fiscal fourth quarter.
sales drop
Executives say Starbucks’ most loyal customers have remained loyal and have been taking advantage of discounts offered through the company’s mobile app. But executives say occasional coffee drinkers are buying less Starbucks macchiatos and cold brews; Narasimhan said these customers want more variety in their coffees.
Starbucks plans to offer a version of the app that allows customers to order without becoming a loyalty member, in an effort to entice these occasional customers to come back more often.
Narasimhan said Starbucks is also exploring how to meet overnight demand, with the company conducting a pilot test from 5 p.m. to 5 a.m., a move that Narasimhan said has doubled business.
He also said the chain’s lavender drink is one of its most successful products.
“Building on this success, we are actively pursuing options to build a $2 billion business over the next five years,” he said.
McDonald’s, Pepsi and other companies said this quarter Low-income consumers have dropped out their spending and are looking for deals.
“While this was a difficult quarter, we learned from our underperformance and adopted a comprehensive roadmap of thoughtful actions,” Chief Financial Officer Rachel Ruggeri said in a statement. The path forward is clarified, thereby sharpening our focus.
Narasimhan also said the company now expects supply chain cost savings of $4 billion over the next four years, revising its forecast of $3 billion over the previous three years.
