A Starbucks coffee cup sits on a table at one in all the coffee chain’s locations in Miami, Florida, on June 11, 2021.
Joe Raedle | Getty Images News | Getty Images
Starbucks on Tuesday reported quarterly earnings and revenue that missed Wall Street’s expectations as each domestic and international sales fell in need of estimates.
CEO Laxman Narasimhan said on the corporate’s conference call that the chain faced “headwinds,” including a boycott within the U.S. and increased discounting by rivals in China. The corporate lowered its full-year revenue outlook because of this.
Shares initially fell in prolonged trading but recovered, rising about 3%.
Here’s what the corporate reported for its fiscal first quarter in comparison with what Wall Street was expecting, based on a survey of analysts by LSEG, formerly often called Refinitiv:
- Earnings per share: 90 cents, adjusted vs. 93 cents expected.
- Revenue: $9.43 billion vs. $9.59 billion expected.
The coffee giant reported fiscal first-quarter net income of $1.02 billion, or 90 cents per share, up from $855.2 million, or 74 cents per share, a yr earlier.
Excluding restructuring costs and other items, Starbucks earned 90 cents per share.
Net sales rose 8% to $9.43 billion. Global same-store sales increased 5%, falling in need of StreetAccount estimates of seven.2%.
In North America, same-store sales also rose 5%, driven largely by customers spending more on their drinks and food.
But Narasimhan said U.S. traffic lagged, starting in mid-November. He cited what he called “misperceptions” concerning the company’s position on the Israel-Hamas war, and said the decline in sales largely got here from customers who only visited occasionally.
The controversy kicked off when Starbucks Staff United, which represents a whole bunch of the chain’s unionized cafes, posted in support of Palestinians, resulting in backlash from conservatives. Starbucks sought to distance itself from the tweet, which the union deleted, and sued Staff United for trademark infringement.
Narasimhan also wrote a letter to staff in December, condemning misinformation and looking for to extricate Starbucks from the controversy.
The chain’s most loyal customers have stood by Starbucks, Narasimhan said. Starbucks is looking for to bring back other customers by targeting them with promotions through its loyalty program and latest Valentine’s Day drinks.
Starbucks’ fiscal first quarter also encompasses the all-important holiday season. The chain normally nets billions of dollars in gift card sales, plus higher traffic fueled by its seasonal drink offerings and thirsty shoppers. Narasimhan said consumers loaded $3.6 billion onto gift cards this quarter, breaking the chain’s record.
Outside of Starbucks’ home market, the coffee chain reported international same-store sales growth of seven%, missing expectations of 13.2%. Narasimhan said sales at locations within the Middle East also fell because of the war.
China, the corporate’s second-largest market, reported same-store sales growth of 10%. Nevertheless, the typical ticket at its Chinese stores fell 9%. Chinese consumers are “more cautious,” in line with Narasimhan.
The chain has seen increased competition from lower-priced rivals corresponding to Luckin Coffee, which have won over consumers as China’s economic recovery continues to lag.
Starbucks executives said the challenges it faced this quarter are “transitory,” but damaging enough that the corporate revised its full-year sales outlook. Chief Financial Officer Rachel Ruggeri also said January’s sales have been softer than expected.
For fiscal 2024, the corporate now anticipates revenue growth of seven% to 10%, down from its prior forecast of 10% to 12%. Starbucks also lowered its global same-store sales outlook to a spread of 4% to six%, from its previous range of 5% to 7%.
The corporate reiterated its full-year forecast of earnings per share growth of 15% to twenty%.