Starbucks glass art in a store in Tokyo.
Jakub Bolzycki | Noor Photos | Getty Images
Starbucks Tuesday Reported Quarterly Revenue That was below analysts’ expectations as both its U.S. and international cafes faced weak demand.
Still, the results weren’t as bad as investors feared. The company’s shares rose more than 5% in after-hours trading.
The company’s report compared with Wall Street expectations, according to a survey of analysts by London Stock Exchange Group (LSEG):
- Earnings per share: 93 cents adjusted, 93 cents expected
- Revenue: $9.11 billion, $9.24 billion expected
The coffee giant reported third-quarter net income attributable to the company of $1.05 billion, or 93 cents a share, down from $1.14 billion, or 99 cents a share, in the same period last year.
Excluding other merchandise, Starbucks earned 93 cents per share.
net sales fall 1% to $9.11 billion. The company’s same-store sales fell 3% in the quarter as transaction volume fell 5%.
Traffic at its U.S. stores fell again this quarter, down 6%. Domestic same-store sales fell 2%, driven by an increase in average ticket prices. Last quarter, executives discussed plans to revive the lagging U.S. business, which included relying on discounts and new beverages to win back customers who had abandoned the chain.
Chief Executive Laxman Narasimhan said on Tuesday that more shoppers are buying packaged coffee at grocery stores but that a “challenging consumer environment” is hurting sales at its cafes.
Still, the company has seen signs of recovery in its U.S. business, such as the success of new products. Its summer berry refreshing drink, which contains boba-style pearls, broke the company’s record for a one-week product launch. Next season, its pumpkin spice drink will also return, a cult favorite since its launch more than two decades ago.
The company now allows customers to order and pay through its mobile app without joining its rewards program. Improvements to its app also mean it can more accurately predict when orders will be ready, leading to fewer customer complaints. Following last quarter’s dismal report, the former CEO posted a letter on LinkedIn Howard Schultz says The company needed to fix the mobile app experience to win back customers.
Schutz isn’t the only investor unhappy with Starbucks’ recent performance. Activist hedge fund Elliott Management already owns shares in Starbucks. Narasimhan acknowledged the company as a Starbucks shareholder and said the dialogue so far has been constructive.
Outside North America, same-store sales fell 7%. In China, Starbucks’ second largest market, same-store sales fell 14% as average tickets and transaction volume fell.
Starbucks faces tougher competition in China from local coffee shops that undercut the coffee giant on price. But there are also encouraging signs in the country. Narasimhan said average daily transaction volumes and weekly sales in China improved from the previous quarter.
Narasimhan said the company is in the “early stages” of exploring strategic partnerships to accelerate its growth in China. It’s unclear what form this partnership will take.
Starbucks opened 526 net new stores during the fiscal quarter.
The company reiterated the outlook it provided last quarter. The company expects revenue to grow by a low-single-digit percentage and earnings per share to grow by a flat to low-single-digit percentage.
