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Starbucks announced the suspension of its guidance for the entire next fiscal year on Tuesday. The preliminary results for the last fiscal quarter showed a continued decline in sales as the coffee giant grapples with challenges. The new CEO Brian Niccol is focused on turning the company’s fortunes around.
The coffee chain reported preliminary fourth-quarter results with a decline in same-store sales, net revenue, and profit due to weak demand in the U.S.
Global sales for Starbucks fell by 7% in July-September, marking the third consecutive quarter of decline. The company reported a 2% decline in global comparable store sales for the full fiscal year 2024.
Earnings per share dropped by 25% to 80 cents compared to the same period last year, while consolidated net revenues declined by 3% to $9.1 billion for the fourth quarter of fiscal year 2024.
Despite a 4% drop in its shares in after-hours trading, the stock has seen a 28% increase since Niccol took over as CEO.
Niccol emphasized the need for a change in strategy with the ‘Back to Starbucks’ plan, focusing on simplifying the menu and adjusting pricing. The marketing strategy will shift to highlight handcrafted drinks and coffee innovation.
The company expects a 6% decline in comparable sales in the U.S. and a 14% decline in China for the fourth quarter, prompting the suspension of its annual outlook for fiscal year 2025.
Chief Financial Officer Rachel Ruggeri acknowledged the challenges and the need for a turnaround plan to address declining traffic and profitability.
A reality check
Analysts believe that Starbucks can return to positive comparable sales under Niccol’s leadership but caution about the timeline for profitability reinvigoration. Multiple strategies are expected to be implemented to boost sales.
Prior to Starbucks, Niccol successfully addressed challenges at Chipotle Mexican Grill, leading to improved sales and customer engagement.
Starbucks faces competition, weak demand in key markets, and criticism from investors to enhance its business performance.
Niccol aims to reestablish Starbucks’ position as the community coffeehouse in the U.S. within the first 100 days of his tenure as CEO.
Shaken by boycott
Starbucks, like other Western food and beverage brands, faced boycotts and protests globally, affecting its financial performance over recent quarters. The company experienced a decline in sales due to perceived support for Israel.
Despite the challenges, Starbucks plans to proceed with its fourth-quarter earnings conference call on Oct. 30.
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Emil Kovács graduated from the Journalism program at Eötvös Loránd University in Hungary. During his journalism studies, he focused on data journalism, investigative reporting, and multimedia storytelling. He gained experience by writing for the university’s student newspaper, where he gained attention for his articles on social issues. After graduation, Emil began working as a reporter at a European news agency, where he conducts in-depth analyses of international news and current events.
