Starbucks saw its business revenue dip by 1% in the April-June period, driven by weaker customer traffic in the U.S. and China.
Yet, the coffee giant remains optimistic about bouncing back in the next fiscal year, set to begin this fall, thanks to new products and efficiency improvements.
“We’re focused on controlling what we can in a consumer environment that’s ‘complex’,” said CEO Laxman Narasimhan during a call with investors.
He noted that consumers are becoming more cautious with spending, a sentiment echoed by McDonald’s, which also reported a 1% drop in same-store sales for the same period.
Starbucks reported a 3% decline in same-store sales, slightly worse than the 2.7% drop analysts expected. In China, same-store sales plunged 14%, impacted by competition from lower-priced rivals. Despite this, Narasimhan believes in the potential of the Chinese market, Starbucks’ second-largest with 6,500 stores. The company is exploring strategic partnerships or joint ventures in China to accelerate growth and reduce market volatility.
In the U.S., same-store sales fell 2%. However, increased spending per visit mitigated a 6% decline in traffic. Highlights included the new Summer-Berry Refresher, featuring boba-like raspberry pearls, which achieved the highest first-week sales for any new product in the company’s history. Additionally, U.S. loyalty members grew by 7% during the quarter.
Narasimhan acknowledged challenges such as boosting afternoon sales and improving supply chains. The popularity of the Summer-Berry Refresher led to ingredient shortages, affecting marketing efforts. Starbucks also faced boycotts in the Middle East, Southeast Asia, and parts of Europe due to its perceived stance on the Gaza conflict.
Starbucks’ fiscal third-quarter revenue was $9.1 billion, slightly below the $9.2 billion expected by analysts. Net income dropped 7.6% to $1.05 billion, or 93 cents per share, aligning with forecasts. The company confirmed that activist investor Elliott Investment Management has taken a stake in Starbucks.
Despite the mixed results, Starbucks shares rose 3% in after-hours trading on Tuesday, although the stock has declined 25% over the past year.
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