[CHICAGO] Starbucks’ chief executive officer said he’s confident the company’s turnaround is progressing even though a key gauge of sales declined faster than expected in the latest quarter.
Same-store sales declined 1 per cent in the quarter ended Mar 30, according to a statement on Tuesday (Apr 29), falling short of the average estimate of analysts polled by Bloomberg. Earnings per share also missed expectations.
Starbucks is working to revive sales growth after price increases, long lines and boycotts related to the company’s perceived stance on war in the Middle East turned customers away. The company is contending with Americans’ increasingly bleak outlook on the economy, which also contributed to weak results at Chipotle Mexican Grill.
Under chief executive officer Brian Niccol, who started in September, Starbucks kicked off an overhaul of its cafes to make them more welcoming. It’s also working to speed up service by adding more workers to stores and rolling out an algorithm to prioritise which orders to prepare, among other initiatives.
“Our financial results don’t yet reflect our progress, but we have real momentum,” Niccol said in remarks released alongside the earnings report, adding: “We know we will return the business to growth.”
The shares slipped 1 per cent at 4.14 pm in extended trading in New York. The stock has declined 7 per cent so far this year through Tuesday’s close, slightly more than the drop of the S&P 500 Index over the same period.
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Analysts had lowered their expectations for same-store sales ahead of the earnings report, according to data compiled by Bloomberg. Third-party sources, including Placer.ai’s mobility data, suggest that visits to Starbucks slipped in the first three months of 2025 from a year ago.
Analysts also factored in how costs related to the company’s corporate restructuring would hit profits, as well as spending tied to the turnaround efforts.
The comparable-sales results represent an improvement from the company’s previous quarter, when the measure fell 4 per cent. It’s the fifth consecutive decline.
“It does sound as though the things that the new CEO can control are working out for them, in terms of slimming down the menu and trying to become more efficient,” said Don Nesbitt, a senior portfolio manager at F/m Investments, which owns Starbucks shares.
In North America, the company’s biggest market, a decline in transactions drove a deeper-than-expected comparable sales decline. The international business performed better, with comparable sales rising 2 per cent. China was also a bright spot, with flat sales coming in better than expected and improving markedly from the prior quarter.
Starbucks said it’s taking actions such as diversifying its coffee sources and redirecting shipments to minimise tariffs. The company is building up its stockpile of coffee, among other measures, to cope with volatile prices for arabica beans.
In a filing, the company said that changes to its store footprint and operations could result in additional restructuring charges. BLOOMBERG
