In this article, Starbucks reported that its same-store sales declined for the fourth consecutive quarter, but the company exceeded Wall Street’s expectations in terms of quarterly earnings and revenue. The coffee giant initiated a turnaround plan last quarter to revive its U.S. business, which has been struggling over the past year.
CEO Brian Niccol expressed optimism about the progress made according to plan, stating that the company is on the right track. He mentioned a positive response to the initial steps taken, such as eliminating extra charges for nondairy milk options, emphasizing coffee in marketing efforts, and reducing 30% of food and beverage menu items by the end of fiscal 2025.
In comparison to analyst expectations surveyed by LSEG, Starbucks reported a fiscal first-quarter net income of $780.8 million, or 69 cents per share, down from the previous year. Net sales remained steady at $9.4 billion. Same-store sales dropped by 4%, with a 6% decrease in store traffic, outperforming Wall Street’s anticipated decline of 5.5%. Both U.S. and international locations exceeded expectations.
In the U.S., same-store sales fell by 4% with an 8% decline in café traffic. Niccol’s strategy to refocus on coffee and customer experience aims to revitalize the U.S. business. The company reduced discounts, leading to a 40% decrease in discounted transactions during the quarter, contributing to sales improvement.
Internationally, same-store sales also decreased by 4%. In China, the second-largest market, same-store sales dropped by 6%, driven by a 4% decline in average ticket. Starbucks is exploring strategic partnerships to expand its presence in China.
The company suspended its fiscal 2025 forecast in October due to ongoing turnaround efforts. Executives also stepped back from a supply-chain cost savings target of $4 billion by 2028. Starbucks plans to reduce new locations and renovations in fiscal 2025 to allocate capital for its recovery, while still seeing potential for store count growth in the long term.
Efforts to enhance service speed include scheduling more workers, streamlining operations behind coffee counters, and introducing new equipment like the Siren system for faster drink preparation. Starbucks is testing an algorithm to optimize drink orders and is restructuring its corporate workforce under Niccol’s leadership.
In early March, Starbucks plans to implement layoffs, although specific details on the number of affected jobs have not been disclosed.
