Starbucks, the popular coffee chain, reported quarterly revenue that fell short of analysts’ expectations, attributed to weaker demand in both its U.S. and international cafes. Despite this, the company’s shares rose by over 1% in extended trading.
In terms of earnings per share, Starbucks reported 93 cents adjusted, which was in line with expectations. However, its revenue came in at $9.11 billion, below the projected $9.24 billion. Net income attributable to the company for the fiscal third quarter was $1.05 billion, or 93 cents per share, compared to $1.14 billion, or 99 cents per share, the previous year.
The decline in revenue can be attributed to a 1% drop in net sales and a 3% decrease in same-store sales. This decline was fueled by a 5% drop in transactions, indicating weaker customer footfall. In the U.S., traffic to Starbucks stores fell by 6%, leading to a 2% decline in domestic same-store sales. To counter this, Starbucks had previously announced plans to revive its U.S. business by implementing discounts and introducing new drinks to entice customers back.
Internationally, same-store sales saw a sharper decline of 7%, with China experiencing a significant drop of 14%. Both the average ticket and transactions in China decreased, as Starbucks faced increased competition from local coffee shops offering lower-priced alternatives.
Despite these challenges, Starbucks continued its expansion efforts, opening 526 net new stores during the fiscal quarter. Looking ahead, the company will discuss its outlook for fiscal 2024 on its upcoming conference call. In the previous quarter, Starbucks had reduced its forecast, expecting low single-digit revenue growth and flat to low single-digit earnings per share growth.
It is important to note that the coffee industry as a whole is facing increased competition from alternative beverage options, such as energy drinks and specialty teas. Additionally, the COVID-19 pandemic has had a significant impact on consumer behavior, with many opting for at-home coffee brewing instead of visiting cafes. These factors have likely contributed to Starbucks’ weaker performance.
In conclusion, Starbucks’ quarterly revenue fell short of expectations due to decreased demand in both its U.S. and international locations. The company has faced challenges in reviving its lagging U.S. business and has encountered increased competition in China. Despite these setbacks, Starbucks continues to open new stores and will provide further insight into its future outlook in the upcoming conference call.
