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Starbucks shares tumble after warning of drop in sales, profit

Starbucks has suspended its earnings forecast for next year as new CEO Brian Nicol seeks to turn around the coffee giant, which has struggled with declining demand for expensive drinks.

The coffee chain also reported preliminary results for the fourth quarter, saying same-store sales, net revenue and profits were down, weighed down by weak demand in the United States.

The company's shares fell about 4% in after-hours trading. Since the company appointed Nicol as CEO in early August, the stock has increased nearly 28%.

“It's clear that we need to fundamentally change our strategy to get back on track for growth, and that's exactly what we're doing with our Return to Starbucks,” said Nicol, who was suddenly appointed to the top job in August. That's what we're planning to do,” he said. ”


CEO Brian Nicol, who took over last month, is aiming to turn around the coffee giant, which has struggled to ease customer demand. AP

He said Starbucks would “simplify its overly complex menu and revise its pricing structure.”

The company now expects comparable sales to decline 6% in the U.S. and 14% in China for the fourth quarter ending Sept. 29. The company has suspended its full-year outlook for the fiscal year ending September 2025.

“Despite increased investment, we were unable to reverse the trajectory of traffic decline,” Chief Financial Officer Rachel Ruggeri said. “We are planning to rebuild the business, but it will take time.”

Ruggeri said the company increased its quarterly dividend from 57 cents a share to 61 cents a share to boost investor confidence in its turnaround plan.

Starbucks' rewards program didn't help improve customer traffic. As part of its turnaround plan, Nikkor said it aims to change its marketing efforts and shift its focus to all customers, not just Starbucks Rewards members.

Before joining Starbucks, Mr. Nicol was CEO of Chipotle Mexican Grill, where he solved problems for the burrito maker, agreed with critics and revitalized sales.


starbucks customer
The coffee chain is also expected to report lower quarterly sales and profits, and its stock price fell after hours. AFP (via Getty Images)

At Starbucks, Mr. Nicol took over from Mr. Laxman Narasimhan and inherited several challenges at the coffee giant, which has been under pressure from activist investors to improve its business.

The coffee chain is also struggling with increased competition and weak demand in its two major markets, the United States and China.

Nicole developed a plan for the first 100 days focused on improving the customer experience in U.S. stores.

The company still plans to hold its scheduled fourth-quarter earnings conference call on October 30th.

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