Starbucks stock soared Wednesday as the company's inflation-hit customers cut back on expensive coffee, even as new CEO Brian Nicol begins a turnaround plan. The stock fell in response to a warning that
The Seattle-based Java giant released preliminary results for its latest quarter, revealing same-store sales fell 7% in the fourth quarter, the biggest drop since the pandemic.
Preliminary figures show that sales fell 3% to $9.1 billion, lower than expectations of $9.4 billion.
The troubled chain reported adjusted earnings per share of 80 cents, $1.03 less than expected, and suspended its financial forecast for the year ending in 2025.
“The lower-than-expected full-year results were the result of significant traffic declines, including a cautious consumer environment,” Java Chain said in a statement.
Mr. Nicol, a former Chipotle executive hired last month who brought a breath of fresh air to the company, said Starbucks would simplify its complex and jargon-heavy menu, fix prices and ensure all drinks were handed directly to customers. said it was necessary to do so.
“Our fourth quarter results made it clear that we need to fundamentally change our strategy to get back on track for growth,” Nicol said in a statement.
“We need to focus on what has always set us apart: cozy coffeehouses where people come together and serve the finest coffee handcrafted by our expert baristas,” Nichol said in a statement. mentioned in.
Nicol said Starbucks will share more details during its Oct. 30 earnings call.
Starbucks stock recently fell 0.9% to $95.94.
Starbucks announced that it blamed weak demand in North America for its poor performance. Same-store sales in North America decreased 6%.
Despite additional promotions and new menu offerings through the company's mobile app, traffic declined by 10%.
In China, Starbucks' second-largest market, same-store sales fell 14%, which the company blamed on intense competition.
“Despite increased investment, we have been unable to reverse the trajectory of traffic decline, resulting in pressure on both sales and earnings,” Chief Financial Officer Rachel Ruggeri said in a statement. said.
Ruggeri said the company was working on a turnaround plan, but warned it would take time.
Despite the disappointing quarter, Starbucks raised its dividend from 57 cents per share to 61 cents per share.
Ruggeri said Starbucks increased its dividend “to amplify our confidence in the business and provide some certainty as we move forward with our turnaround.”
This preliminary earnings report is just the latest failure for Starbucks.
The company has lowered its sales forecast twice this year and is struggling to win back occasional customers who have stopped buying the chain's expensive drinks to save money.
Nicol has been widely praised for leading Chipotle's turnaround and pushing the burrito chain's stock price more than 50% over the past year.
Mr. Nicol joined Starbucks' executive team in September as activist investors piled up stakes in the startup and the company suffered two consecutive quarters of declining sales.
In addition to focusing on customer experience and revamping Starbucks stores, Nicole led the company's restructuring.
Starbucks announced Friday that Treci Lieberman, former vice president of digital marketing at Chipotle, will join the company in the newly created role of global chief brand officer.
Last month, Starbucks announced that North American CEO Michael Conway, who was appointed by Nicol's predecessor, Laxman Narasimhan, would be stepping down after just five months in the job.
