Starbucks on Tuesday reported weaker-than-expected quarterly earnings and revenue, fueled by a surprise decline in same-store sales.
“In a highly challenged environment, this quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead,” CEO Laxman Narasimhan said in a statement. “It did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us.”
Shares of the company fell 10% in extended trading.
Here’s what the company reported compared with what Wall Street was expecting, 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 fiscal second-quarter net income attributable to the company of $772.4 million, or 68 cents per share, down from $908.3 million, or 79 cents per share, a year earlier.
Net sales dropped nearly 2% to $8.56 billion. The company’s same-store sales fell 4% as traffic to its cafes declined 6% in the quarter. Wall Street was anticipating same-store sales growth of 1%, according to StreetAccount estimates.
Across all regions, Starbucks reported shrinking same-store sales and falling traffic.
In the U.S., same-store sales decreased 3% as traffic sank 7%. This marks the second quarter that the company’s home market has struggled. Last quarter, executives blamed sluggish sales on boycotts targeting the company due to “misperceptions” of its stance on Israel.
Starbucks’ international segment reported same-store sales declines of 6% as both average ticket and transactions dropped. In China, Starbucks’ second-largest market, same-store sales plunged 11%, fueled by an 8% decline in average ticket.
McDonald’s, PepsiCo and other companies have said this quarter that low-income consumers have pulled back their spending and are looking for deals.
“While it was a difficult quarter, we learned from our own underperformance and sharpened our focus with a comprehensive roadmap of well thought out actions making the path forward clear,” CFO Rachel Ruggeri said in a statement.
Starbucks said it will discuss its full-year financial outlook during the company’s conference call later on Tuesday. Last quarter, it said it anticipates revenue growth of 7% to 10%, global same-store sales growth in a range of 4% to 6% and earnings per share growth of 15% to 20%.
This story is developing. Please check back for updates.