Starbucks released preliminary quarterly results on Tuesday, indicating a continued decline in sales as the coffee giant seeks to implement a turnaround strategy. CEO Brian Niccol emphasized the need for fundamental changes, stating, “Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth, and that’s exactly what we are doing with our ‘Back to Starbucks’ plan.”
Details regarding the company’s recovery efforts will be unveiled during an earnings call scheduled for October 30. Niccol aims to address decreasing demand, particularly in the U.S., which is Starbucks’ largest market. The CEO highlighted a shift in marketing focus to engage all customers rather than just loyalty program members. Additionally, plans to simplify the menu, adjust pricing, and ensure direct customer service have been identified as key initiatives, responding to feedback from both customers and baristas.
Preliminary net sales for the quarter fell by 3% to $9.1 billion, with adjusted earnings per share at 80 cents, below analyst expectations of $1.03 per share and $9.38 billion in revenue. Following the announcement, Starbucks shares dropped over 3% in extended trading.
This marks the third consecutive quarter of declining same-store sales, which fell 7%—the steepest decline since the pandemic. The company attributed weak performance to reduced demand in North America, where same-store sales dropped 6%, and traffic decreased by 10%, despite recent promotional efforts and product expansions. In China, same-store sales fell 14%, influenced by increased competition and changing consumer behavior.
Starbucks has also suspended its fiscal 2025 outlook, citing the leadership transition and the current business landscape. Nonetheless, the company increased its dividend from 57 cents to 61 cents per share, aiming to bolster investor confidence. Chief Financial Officer Rachel Ruggeri noted that while a turnaround plan is underway, its development will take time.
Niccol’s appointment comes on the heels of two quarters of falling sales and increased scrutiny from activist investors. The company is experiencing a decline in occasional customers in the U.S., who are opting for more budget-friendly options, while its recovery in China remains sluggish amid competition from local brands like Luckin Coffee.
Having previously led a successful turnaround at Chipotle, Niccol is now prioritizing improvements in four key areas: the barista experience, morning service, café operations, and brand identity. The company has also seen changes in its executive team, including the recent appointment of Tressie Lieberman as global chief brand officer and the retirement of North American CEO Michael Conway.
As of Tuesday’s close, Starbucks shares have risen 1% this year, with a market capitalization exceeding $109 billion.
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