A Starbucks coffee shop in Amsterdam.
Nikolaos Oikonomou | Nurphoto | Getty Images
Starbucks On Tuesday it reported lower-than-expected quarterly profit and revenue, fueled by a surprise drop in same-store sales.
“In a highly challenging environment, this quarter’s results do not reflect the strength of our brand, our capabilities or the opportunities ahead,” CEO Laxman Narasimhan said in a statement. “It didn’t meet our expectations, but we understand the specific challenges and opportunities that lie immediately ahead of us.”
The company’s shares fell 10% in extended trading.
Here’s what the company said compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 68 cents adjusted vs. 79 cents expected
- Revenue: $8.56 billion vs. $9.13 billion expected
The coffee giant reported second-quarter net profit attributable to the company of $772.4 million, or 68 cents per share, up from $908.3 million, or 79 cents per share, a year earlier.
Net sales fell nearly 2% to $8.56 billion. The company’s same-store sales fell 4% as traffic to its cafes fell 6% in the quarter. Wall Street had expected same-store sales to rise 1 percent, according to StreetAccount estimates.
Across all regions, Starbucks reported shrinking same-store sales and declining traffic.
“In this environment, many customers have been more discerning about where and how they choose to spend their money,” Narasimhan told analysts on the company’s conference call.
In the US, same-store sales fell 3% as traffic fell 7%. This marks the second quarter that the company’s domestic market has struggled. Last quarter, executives blamed sluggish sales on boycotts targeting the company over “misperceptions” of its stance on Israel.
Narasimhan said the chain’s lavender drinks have been one of its most successful launches.
Starbucks is also exploring how to meet demand during the night, from 5 p.m. until 5 a.m.
“Building on this success, we are aggressively pursuing options to create a $2 billion business over the next five years,” he said.
Starbucks’ international division reported a 6% decline in same-store sales as both average tickets and transactions declined. In China, Starbucks’ second-biggest market, same-store sales plunged 11%, fueled by an 8% drop in average tickets.
McDonalds, PepsiCo and other companies said this quarter that low-income consumers have pulled back on spending and are looking for deals.
“While it was a challenging quarter, we learned from our own underperformance and refocused with a comprehensive roadmap of well-considered actions that make the path forward clear,” CFO Rachel Ruggeri said in a statement.
Narasimhan also said the company now expects to save $4 billion in supply chain costs over the next four years, revising its previous forecast of $3 billion over three years.
Starbucks said it will discuss its full-year financial outlook during the company’s conference call later Tuesday. Last quarter, it said it expected revenue growth of 7% to 10%, global same-store sales growth of 4% to 6% and earnings per share growth of 15% to 20%.
This story is evolving. Check back for updates.