On Tuesday, Starbucks announced its sixth straight quarter of same-store sales declines as the company embarks on a comprehensive turnaround strategy. CEO Brian Niccol expressed optimism in a statement, indicating that the company's recovery is progressing faster than anticipated. Drawing from his previous experience turning around Chipotle Mexican Grill following significant food-safety scandals, Niccol highlighted the positive signs of momentum in a pre-recorded video accompanying the earnings report.
In extended trading, shares of Starbucks rose by 4% following the release of the company's financial results for the quarter ending on June 29. The earnings report revealed a mixed performance compared to Wall Street's expectations, as indicated by a survey of analysts conducted by LSEG. The key figures reported include:
Earnings per Share (EPS): Adjusted EPS was reported at 50 cents, although it remains unclear if this figure is directly comparable to the 65 cents anticipated by analysts. Revenue: Starbucks generated $9.5 billion in revenue, exceeding the expected $9.31 billion.Starbucks reported a fiscal third-quarter net income of $558.3 million, or 49 cents per share, a significant decrease compared to $1.05 billion, or 93 cents per share, from the same period a year earlier. Excluding restructuring costs and other financial impacts, the earnings stood at 50 cents per share. Notably, a discrete tax item and a one-time investment for hosting a three-day event for U.S. store managers negatively affected the earnings per share by 11 cents.
Despite an increase in net sales of 4% to $9.5 billion, global same-store sales experienced a decline of 2%. This drop was steeper than the estimated 1.3% decrease, according to StreetAccount estimates. However, the performance of Starbucks' North American cafes was more favorable than expected, with same-store sales in that region falling only 2%, compared to Wall Street's projection of a 2.5% decline.
Although transactions decreased by 3%, the average ticket size increased by 1% during the quarter. Niccol highlighted several positive developments in the U.S. market, including rising partner engagement, improved customer connection scores, record-high shift completion rates, and a return to growth in non-Starbucks Reward customer transactions. Additionally, more coffeehouses are reporting positive transaction comparisons.
In China, Starbucks reported a remarkable turnaround with same-store sales growth of 2% for the quarter, marking the first increase in a year and a half. The number of transactions climbed by 6%, although the average ticket size saw a decline. To strengthen its competitive position against lower-priced rivals like Luckin Coffee, Starbucks has reduced prices for its drinks in China.
Despite facing pressure from heightened competition, a sluggish economy, and the challenges of its U.S. business, Starbucks has been contemplating the sale of a stake in its China operations, which could potentially be valued at up to $10 billion, as reported by CNBC.
Looking ahead to fiscal 2026, Starbucks has ambitious plans for expansion and innovation. CEO Niccol announced the upcoming launch of several new products, including protein cold foam, enhanced artisanal food options, coconut-water-based drinks, a new Starbucks app, and an upgraded Rewards program. These initiatives aim to rejuvenate the brand and enhance customer engagement while continuing to navigate the challenges of a competitive marketplace.
