Starbucks cuts outlook as Q2 sales, income fall amid customer pullback
Starbucks Corp. reported disappointing revenue and earnings for its second quarter as same-store sales and traffic fell across all its regions.
The coffee giant also lowered its revenue and earnings growth for the full year.
“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. We have a clear plan to execute and the entire organization is mobilized around it.”
On the company’s earnings call, Narasimhan said that some Starbucks customers in the United States were being more careful about spending.
“If I look at the headwinds that we see in the market, particularly with the consumer and the pressures that they face, they were sharper and more accelerated than we expected,” he told analysts. He also said that many customers “have been more exacting about where and how they choose to spend their money.”
Starbucks is hoping to boost U.S. store traffic this summer with the introduction of new drinks, including its first-ever energy beverage. Later in the year, Starbucks plans to introduce sugar-free options for most of its drinks.
Also, on the heels of a successful pilot, the retailer plans to start offering overnight service in many markets, Narasimhan said on the call.
Starbucks reported net income of $772.4 million, or $0.68 per share, for the quarter ended. down from $908.3 million, or $0.79 per share, in the year-ago period. Analysts had expected earnings of $0.79 per share.
Net sales dropped nearly 2% to $8.56 billion, missing estimates of $9.13 billion, as customers visited Starbucks stores less frequently and cut back on the size of their orders. Same-store sales were down 4% as traffic declined 6%.
Same-store U.S. sales fell 3% amid a 7% decline in traffic. Bad weather closed some U.S. stores briefly during the quarter, Starbucks said.
International same-store sales fell 6%. In China — Starbucks’ second-largest market after the U.S. — same-store sales dropped 11% amid an 8% decline in average ticket.
The company opened 364 net new stores during the quarter, ending the period with 38,951 stores (52% company-operated and 48% licensed). Stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,600 and 7,093 stores in the U.S. and China, respectively.
For fiscal 2024, Starbucks now expects revenue growth in the low single digits, down from its prior forecast of 7% to 10%. It expects earnings per share growth in a range of flat to low single digits, down from its previous projection of earnings growth of 15% to 20%.