Starbucks on Tuesday posted preliminary quarterly results that showed its sales fell again as the coffee chain tries to execute a turnaround.
The company’s preliminary net sales fell 3% to $9.1 billion.
Shares of the company fell more than 3% in extended trading on the announcement.
For the third consecutive quarter, Starbucks’ same-store sales fell.
To curb Starbucks’ sales slump, Niccol plans to turn first to the company’s struggling U.S. business.
As the coffee chain attempts to implement a turnaround, Starbucks revealed preliminary quarterly results on Tuesday that showed a decline in sales once again.
“We need to fundamentally change our strategy in order to get back to growth, and that’s exactly what we are doing with our ‘Back to Starbucks’ plan,” CEO Brian Niccol said in a statement following the company’s fourth-quarter performance.
Niccol stated that during the company’s earnings call in October, he will provide additional information about the measures Starbucks is taking to turn the company around. thirty. Beginning with its biggest market, the United States, the coffee chain’s new CEO hopes to reverse the declining demand for its beverages. S.
The company is already “fundamentally changing” its marketing strategy, according to the CEO, by refocusing on all of its clients, not just those who are part of its loyalty program. He went on to say that Starbucks intends to streamline its “overly complex menu,” set its prices, and ensure that all of its drinks are delivered straight to patrons. In the past few years, patrons and baristas have voiced their concerns about all three of those objectives.
According to Niccol’s prepared remarks posted on the company’s website on Tuesday, “We believe that our problems are very fixable and that we have significant strengths to build on.”.
The company’s initial net sales dropped 3% to $9.1 billion. It declared 80 cents in preliminary adjusted earnings per share.
According to LSEG’s survey of analysts, the company was anticipated to report revenue of $9.38 billion and earnings per share of $1.03 for the fiscal fourth quarter.
After the announcement, the company’s stock dropped more than 3% during extended trading.
Starbucks saw a decline in same-store sales for the third consecutive quarter. The company experienced its biggest drop in same-store sales since the Covid-19 pandemic, with a 7% decline this quarter.
The company attributed its poor sales to a decline in North American demand. Sales at the same stores fell 6% in its home market. Notwithstanding increased business investments, such as more frequent promotions in its mobile app and a wider range of product offerings, traffic fell by 10%.
Its second-largest market, China, saw a 14 percent decline in comparable sales. The company blamed the drop on national competition, which it claimed was modifying consumer behavior and the company’s approach to the market.
Additionally, the company halted its fiscal 2025 outlook, citing the “current state of the business” and the recent CEO transition. “..”.
The company raised its dividend per share from 57 cents to 61 cents, despite the poor quarter.
“As we drive our turnaround, we want to amplify our confidence in the business, and provide some certainty,” said Rachel Ruggeri, the chief financial officer.
The company is working on a plan to turn the business around, but it will take time to develop a strategy, Ruggeri added.
Nearly two months after Niccol assumed leadership of the coffee behemoth, the company’s preliminary results were unexpectedly revealed. Following two quarters of declining Starbucks sales, a number of activist investors increased their stake in the company, which led to the CEO change.
In the United States. S. The restaurant chain has been losing its occasional patrons who have chosen to forgo its macchiatos and refreshers in favor of saving money. Starbucks’ business in China has also been having trouble recovering from the pandemic, and sales have been hurt recently by the emergence of less expensive local competitors like Luckin Coffee and more cautious customers.
After six years as CEO of Chipotle Dot, Niccol joined Starbucks. During his time at the fast-casual chain, he invested in its digital business, led the company through a turnaround following its foodborne illness crises, and made it a top performer in the industry, even during the pandemic.
Niccol intends to focus on Starbucks’ faltering U.S. market in order to reverse the company’s sales decline. S. commerce. He stated in an open letter published during his first week of work that he intends to concentrate on four areas of improvement: the company’s branding, morning service, cafes, and barista experience.
Additionally, Niccol has been reorganizing the executive team of the business. Tressie Lieberman, a former executive at Chipotle, will succeed Starbucks as its global chief brand officer, a newly created role, the company announced on Friday. Starbucks announced last month that Michael Conway, its CEO for North America, would step down after only five months in the position. Prior to his removal in August, Niccol’s predecessor, Laxman Narasimhan, had appointed Conway.
By Tuesday’s close, Starbucks’ stock was up 1% so far this year. The market value of the business exceeds $109 billion.
