The glass is half empty for Starbucks ( SBUX ) this quarter.
As for its Q2 earnings, the company posted lower-than-expected revenue, earnings and same-store sales growth as customers scaled back the frequency of their visits and the volume of their orders.
CEO Laxman Narasimhan called it a “very challenging environment”.
During the earnings call, he said of macro headwinds, “especially around the pressures that consumers are facing, especially with occasional customers … that's where the challenge is.”
It was Starbucks' first quarterly sales decline since 2020, when Covid shutdowns rocked the industry.
Revenue for the second quarter fell 2% year over year to $8.6 billion. Adjusted earnings per share also fell 8% to $0.68.
Global same-store sales fell 4% from a year ago as transactions fell 6%, partially offset by a 2% increase in average ticket volume.
Shares of the coffee chain fell more than 12% in after-hours trading.
Starbucks has tried to woo customers with afternoon promotions and new offerings like lavender lattes, which “performed as well as PSL (Pumpkin Spice Latte) last quarter,” Narasimhan said.
However, menu innovations haven't moved the needle for the coffee company.
In its North America and U.S. business, same-store sales fell 3%, foot traffic fell 7% year-over-year, even as ticket volume rose 4%.
From time to time, Starbucks plans to add new promotions to its app to attract customers. In the US, 31% of all Q2 transactions came through its app. However, the number of 90-day active loyalty members fell to 32.8 million from 34.3 million in the previous quarter.
Narasimhan also called the speed of service a part of opportunity. Currently, many customers do not complete their in-app orders due to long wait times or product unavailability. The company is “increasing supply chain investments to further improve availability,” he said.
New products are also available, such as pearls such as boba tea, zero- to low-calorie energy drinks and low-sugar syrups.
For its international business, same-store sales fell 6%, with a 3% decline in foot traffic and ticket volume. Like McDonald's, Starbucks said conflicts in the Middle East are weighing on international sales.
Narasimhan shared his concerns about current events and misinformation being spread about the company internal reference In mid-December.
But China saw the biggest decline, with same-store sales down 11%, foot traffic down 8%, and average ticket volume down 4%.
“Performance was impacted by occasional customer declines, changing holiday patterns, a heavy promotional environment and normalization of customer behaviors following last year's market reopening.” Narasimhan said in the call.
Stores in the US and China account for 61% of the company's portfolio.
The company revised its 2024 outlook for the third time this fiscal.
As of Q2, Starbucks expects global revenue growth in the low-single digits in 2024, down from the previous range of 7% to 10%, down from previous guidance of 10% to 12%.
Global and U.S. same-store sales are expected to see a low single-digit decline from the previous range of 4% to 6% growth. China's same-store sales are expected to see a single-digit decline, down from low-single-digit growth previously expected.
Starbucks originally expected same-store growth in its markets in the mid-single digits.
Here's what Starbucks reported, compared to Wall Street estimates, according to Bloomberg consensus estimates:
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Adjusted earnings per share: $0.68 and $0.80
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Revenue: $8.56 billion and $9.13 billion
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Same Store Sales Growth: -4% vs 1.46%
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North America: -3% vs. 2.05%
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For us: -3% vs 2.31%
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International: -6% vs 1.36%
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China: -11% vs -1.62%
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Foot Traffic Growth: -6% vs. -0.27%
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North America: -7%, up from 6% in Q2 2023
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International: -3%, up from 7% in Q2 2023
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Ticket Volume Growth: 2% vs 2.41%
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North America: 4%, up from 5% in Q2 2023
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International: -3%, compared to flat in Q2 2023
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Brooke DePalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DePalma Or send an email to [email protected].
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