Starbucks shares fell Wednesday after the company warned that its inflation-battered customers are cutting back on its pricier coffee — even as its new CEO Brian Niccol launches a turnaround bid.
The Seattle-based java giant released preliminary results for the latest quarter, which showed its same-store sales declined 7% in the fourth quarter — its steepest decline since the pandemic.
Revenue from preliminary sales fell 3% to $9.1 billion, below expectations of $9.4 billion.
The struggling chain reported adjusted earnings of 80 cents per share, missing estimates of $1.03 — and suspended its financial forecast for the full fiscal year ending in 2025.
“The lower-than-expected performance for the full financial year was the result of a pronounced decline in traffic, including a cautious consumer environment,” the Java chain said in a statement.
Nicole – A Former Chipotle executive hired last month Revitalize the company – Said that Starbucks needed to simplify its complex, jargon-filled menu, fix pricing, and ensure that all drinks were delivered directly to customers.
“Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can return to our path to growth,” Nicol said in a statement.
“We need to focus on what has always set us apart – a welcoming coffeehouse where people gather and where we serve the finest coffee, handcrafted by our skilled baristas,” Nicholl said in a statement.
Niccol said Starbucks will share more details during its earnings call on Oct. 30.
Starbucks shares were recently down 0.9% at $95.94.
Starbucks blamed soft demand in North America for its poor results. Same-store sales in the North America division declined 6%.
Despite additional promotion through the company’s mobile app and new menu offerings, traffic declined 10%.
Same-store sales in China, Starbucks’ second-largest market, fell 14%, which the company attributed to tougher competition.
“Despite our increased investment, we were unable to reverse the trajectory of our traffic decline, resulting in pressure on both our top-line and bottom-line,” Chief Financial Officer Rachel Ruggeri said in a statement.
Ruggeri said the company is working on a turnaround plan, but warned it will take time.
Despite the disappointing quarter, Starbucks raised its dividend from 57 cents to 61 cents per share.
Ruggeri said Starbucks raised its dividend “to increase our confidence in the business, and to provide some certainty as we pursue our transformation.”
The preliminary earnings report is the latest miss for Starbucks.
The company has lowered its sales expectations twice this year and has struggled to win back customers who have stopped buying the chain’s expensive drinks in favor of savings.
Niccol has been widely praised for driving a turnaround at Chipotle, which has sent the burrito chain’s stock up more than 50% in the past year.
Nicole takes charge of Starbucks in September Activist investors built up stakes in the fledgling company and Starbucks suffered two consecutive quarters of sales declines.
In addition to focusing on customer experience and redesigning Starbucks locations, Nicole has led a restructuring of the company.
On Friday, Starbucks announced that Tracy Lieberman, former vice president of digital marketing at Chipotle, will be joining Starbucks in the newly-created position as global chief brand officer.
Last month, Starbucks said its North American CEO Michael Conway – who was appointed by Nicholl’s predecessor, Lakshman Narasimhan – would retire after just five months in the role.
