Connected media – Connected media
On Tuesday, Starbucks reported quarterly revenue that did not meet analysts’ expectations, with both its U.S. and international locations experiencing weaker demand.
Despite the revenue miss, the company’s shares increased by more than 2% in after-hours trading.
Here are the reported financials compared to Wall Street’s expectations, based on a survey conducted by LSEG:
- Earnings per share: 93 cents adjusted vs. 93 cents expected
- Revenue: $9.11 billion vs. $9.24 billion expected
The coffee giant posted a third-quarter net income of $1.05 billion, or 93 cents per share, down from $1.14 billion, or 99 cents per share, in the same period last year. Excluding certain items, Starbucks earned 93 cents per share.
Net sales decreased by 1% to $9.11 billion. Same-store sales fell by 3% during the quarter, driven by a 5% decline in transactions.
Traffic to U.S. stores declined by 6% this quarter. Domestic same-store sales dropped 2%, primarily due to an increase in the average transaction size. Last quarter, executives outlined plans to rejuvenate the struggling U.S. business, including offering discounts and introducing new beverages to attract customers back to the chain.
CEO Laxman Narasimhan stated on Tuesday that there are already signs of growth in the U.S. market, citing the success of new products. The Summer-Berry Refreshers beverages with boba-inspired pearls set a record for the best first-week product launch in the company’s history. The upcoming quarter will also see the return of the popular Pumpkin Spice beverages, a staple since their introduction over two decades ago.
Starbucks now allows customers to order through its mobile app without needing to join its rewards program. Enhancements to the app have also improved its accuracy in predicting when orders will be ready, reducing customer complaints. In a LinkedIn post following last quarter’s disappointing report, former CEO Howard Schultz emphasized the need to improve the mobile app experience to regain customer loyalty.
Schultz is not the only investor concerned about Starbucks’ recent performance. Activist hedge fund Elliott Management has acquired a stake in the company. Narasimhan noted that the hedge fund is a Starbucks shareholder and described the ongoing discussions as constructive.
Internationally, same-store sales declined by 7%. In China, Starbucks’ second-largest market, same-store sales fell by 14%, with decreases in both average receipts and transactions.
Starbucks faces increased competition in China from local coffee shops that offer lower prices. However, there are promising signs in the region. Average daily transactions and weekly sales in China have shown sequential improvement quarter over quarter, according to Narasimhan.
The company is in the “early stages” of exploring strategic partnerships to accelerate its growth in China, though the specifics of such partnerships remain unclear.
Starbucks opened a net 526 new stores during the fiscal quarter.
The company reiterated its guidance from the previous quarter, expecting revenue growth in the low single-digit range and earnings per share growth to be flat to low single digits.
Associated media – Related media
