Starbucks shares sink 12% as coffee chain slashes 2024 forecast amid same-store sales drag

Starbucks
on
Tuesday
reported
weaker-than-expected
quarterly
earnings
and
revenue,
fueled
by
a
surprise
decline
in
same-store
sales.

The
coffee
chain
also
slashed
its
forecast
for
its
fiscal
2024
earnings
and
revenue,
predicting
that
its
cafes
would
keep
underperforming
for
several
quarters.

Shares
of
the
company
fell
12%
in
extended
trading.

“In
a
highly
challenged
environment,
this
quarter’s
results
do
not
reflect
the
power
of
our
brand,
our
capabilities
or
the
opportunities
ahead,”
CEO
Laxman
Narasimhan
said
in
a
statement. “It
did
not
meet
our
expectations,
but
we
understand
the
specific
challenges
and
opportunities
immediately
in
front
of
us.”

The
company’s
same-store
sales
fell
4%
as
traffic
to
its
cafes
declined
6%
in
the
quarter.
Wall
Street
was
anticipating
same-store
sales
growth
of
1%,
according
to
StreetAccount
estimates.

Across
all
regions,
Starbucks
reported
shrinking
same-store
sales
and
falling
traffic.

In
the
U.S.,
same-store
sales
decreased
3%
as
traffic
sank
7%.
This
marks
the
second
quarter
that
the
company’s
home
market
has
struggled.
Last
quarter,
executives
blamed
sluggish
sales
on
boycotts
targeting
the
company
due
to “misperceptions”
of
its
stance
on
Israel.

Starbucks’
international
segment
reported
same-store
sales
declines
of
6%
as
both
average
ticket
and
transactions
dropped.
In
China,
Starbucks’
second-largest
market,
same-store
sales
plunged
11%,
fueled
by
an
8%
decline
in
average
ticket.

“In
this
environment,
many
customers
have
been
more
exacting
about
where
and
how
they
choose
to
spend
their
money,”
Narasimhan
told
analysts
on
the
company’s
conference
call.

Here’s
what
the

company
reported
compared
with
what
Wall
Street
was
expecting,
based
on
a
survey
of
analysts
by
LSEG:

• 
  Earnings
  per
  share:
  68
  cents
  adjusted
  vs.
  79
  cents
  expected
• 
  Revenue:
  $8.56
  billion
  vs.
  $9.13
  billion
  expected

The
coffee
giant
reported
fiscal
second-quarter
net
income
attributable
to
the
company
of
$772.4
million,
or
68
cents
per
share,
down
from
$908.3
million,
or
79
cents
per
share,
a
year
earlier.

Net
sales
dropped
nearly
2%
to
$8.56
billion.

For
fiscal
2024,
Starbucks
now
expects
revenue
growth
in
the
low
single
digits,
down
from
its
prior
forecast
of
7%
to
10%.
The
company
also
revised
its
projections
for
global
and
U.S.
same-store
sales
growth
to
a
range
of
low
single
digits
to
flat
from
its
previous
forecast
of
4%
to
6%.
Same-store
sales
in
China
are
expected
to
decline
by
single
digits,
down
from
the
prior
outlook
of
a
single-digit
increase.

Starbucks
now
also
expects
earnings
per
share
growth
in
a
range
of
flat
to
low
single
digits.
It
previously
forecast
its
earnings
would
climb
15%
to
20%
in
fiscal
2024.

The
company
forecasts
that
sales
will
start
improving
in
the
fiscal
fourth
quarter.

Starbucks’
most
dedicated
customers
have
stayed
loyal
and
been
using
discounts
offered
via
the
company’s
mobile
app,
executives
said.
But
coffee
drinkers
who
visit
only
occasionally
have
been
buying
Starbucks’
macchiatos
and
cold
brew
less
often,
executives
said;
Narasimhan
said
those
customers
want
more
variety
from
their
coffee.

Starbucks
is
planning
to
offer
a
version
of
its
app
that
allows
customers
to
order
without
being
a
loyalty
member
in
order
to
attract
these
occasional
customers
to
visit
more
frequently.

Narasimhan
said
Starbucks
is
also
exploring
how
to
meet
overnight
demand,
from
5
p.m.
to
5
a.m.
The
company
conducted
a
pilot
test,
which
Narasimhan
said
doubled
business.

He
also
said
the
chain’s
lavender
drinks
were
one
of
its
most
successful
launches.

“Building
off
that
success,
we
are
aggressively
pursuing
options
to
build
a
$2
billion
business
over
the
next
five
years,”
he
said.

McDonald’s,


PepsiCo
and
other
companies
have
said
this
quarter
that

low-income
consumers
have
pulled
back
their
spending
and
are
looking
for
deals.

“While
it
was
a
difficult
quarter,
we
learned
from
our
own
underperformance
and
sharpened
our
focus
with
a
comprehensive
roadmap
of
well
thought
out
actions
making
the
path
forward
clear,” CFO
Rachel
Ruggeri
said
in
a
statement.

Narasimhan
also
said
that
the
company
now
expects
supply-chain
cost
savings
of
$4
billion
over
the
next
four
years,
revising
its
prior
forecast
of
$3
billion
over
three
years.