Starbucks reported quarterly earnings and revenue below Wall Street’s expectations, attributing the shortfall to various challenges, including a U.S. boycott and increased competition in China. CEO Laxman Narasimhan cited “headwinds” during a conference call, leading to a lowered full-year revenue outlook. Initially, shares dipped in extended trading but later recovered, experiencing a 3% rise.
In the fiscal first quarter, Starbucks’ earnings per share were 90 cents (adjusted), compared to the expected 93 cents, and revenue was $9.43 billion, falling short of the anticipated $9.59 billion. Despite a global 5% increase in same-store sales, it missed StreetAccount estimates of 7.2%. In North America, same-store sales rose by 5%, primarily driven by increased customer spending.
Narasimhan acknowledged a decline in U.S. traffic starting in mid-November, attributing it to “misperceptions” regarding the company’s stance on the Israel-Hamas conflict. A tweet by Starbucks Workers United supporting Palestinians sparked controversy, resulting in a lawsuit by Starbucks against the union for trademark infringement. Starbucks aimed to distance itself from the issue, and Narasimhan emphasized the loyalty of the chain’s most dedicated customers.
Starbucks plans to regain other customers through promotions in its loyalty program and new Valentine’s Day drinks. The fiscal first quarter, covering the crucial holiday season, saw a record $3.6 billion loaded onto gift cards. However, international same-store sales growth of 7%, falling below the expected 13.2%, was reported. Sales in the Middle East were impacted by the war, while China, the second-largest market, experienced 10% same-store sales growth, coupled with a 9% decrease in the average ticket.
Starbucks executives characterized the challenges faced in the quarter as “transitory,” prompting a revised full-year sales outlook. For fiscal 2024, the company now anticipates revenue growth of 7% to 10%, down from the previous forecast of 10% to 12%. The global same-store sales outlook was adjusted to a range of 4% to 6%, compared to the earlier range of 5% to 7%. The company maintained its full-year forecast of earnings per share growth of 15% to 20%.