Starbucks Corporation disappointed with earnings that missed investors expectations for its most recent quarter. The coffee giant earned 41 cents per share, not accounting for the impact of restructuring costs, which missed Wall Street’s projections. In spite of all these challenges, the company observed that early signs of success are already manifesting in its turnaround strategy.
In its third-quarter financial report, released July 27, Starbucks reported a net sales increase of 2%, bringing it to $8.76 billion. Still, the company withdrew its forecast for fiscal 2025 in October, a sign of how uncertain the company’s near-term performance is expected to be. This uncertainty follows a particularly strong quarter for Starbucks, including its 7th consecutive quarter of same-store sales declines. Within U.S. locations, gross transactions dropped 4%, and same-store sales were down 2%. Sales in China remained flat this quarter. Yet, a decrease in average ticket price offset the transaction increase in that market.
Coffee sales at retailers are dropping as consumers gravitate toward less expensive coffee options. This shift in consumer preferences is leading to a decline in same-store sales. What drives Starbucks’ high sales per unit? As a result, the chain suffered a 1% drop in worldwide same-store sales in the second quarter.
Though these missteps, CEO Brian Niccol sounded bullish on the company’s work to turnaround its U.S. business. He stated, “Our financial results don’t yet reflect our progress, but we have real momentum with our ‘Back to Starbucks’ plan.” Niccol made clear that the company’s immediate priority is getting back to high quality coffee and improving the customer experience.
Starbucks is literally putting this strategy to the test and rolling out innovations in its coffeehouses. “We’re testing and learning at speed and we’re seeing changes in our coffeehouses,” Niccol added, indicating a proactive approach in addressing current market challenges.
On the news, shares of Starbucks fell more than 2% in after hours trading. This $3 billion decline is a testament to investor confidence in the company’s performance and prospects going forward. Full speed ahead Starbucks has no intention of slowing down on these fronts. It is just as committed to the customer experience as it is to restoring its financial performance.