Starbucks glass art at a store in Tokyo.
Jakub Porzycki | Nurphoto | Getty Images
Starbucks On Tuesday, it reported quarterly revenue that missed analysts' expectations as its U.S. and international coffees faced weaker demand.
Still, the results were not as bad as investors had feared. The company's shares rose more than 5% in after-hours trading.
Here's what the company reported compared to what Wall Street expected, according to a survey of analysts by LSEG:
- Earnings per share: Adjusted 93 cents vs. expected 93 cents
- Revenue: $9.11 billion vs. $9.24 billion forecast
The coffee giant reported fiscal third-quarter net income attributable to the company of $1.05 billion, or 93 cents per share, down from $1.14 billion, or 99 cents per share, a year earlier.
Excluding extraordinary items, Starbucks earned 93 cents per share.
Net sales abandonment 1% to $9.11 billion. The company's comparable-store sales fell 3% in the quarter, driven by a 5% decline in transactions.
Traffic to its U.S. stores fell again this quarter, down 6%. Domestic comparable-store sales fell 2%, boosted by an increase in average ticket sales. Last quarter, executives discussed plans to revive the 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 Tuesday that more consumers are buying their packaged coffee from supermarkets, but a “challenging consumer environment” is affecting sales at its cafes.
Still, the company already sees green shoots in its U.S. business, such as the success of new products. Its Summer-Berry Refreshers drinks with boba-inspired pearls broke the company's record for a product launch in one week. The next quarter will also see the return of its Pumpkin Spice drinks, a perennial favorite since its launch more than two decades ago.
The company now allows customers to place orders through its mobile app and pay without joining its rewards program. Improvements to its app also mean it is more accurate at predicting when an order will be ready, reducing customer complaints. In a letter posted on LinkedIn after last quarter’s dismal report, former CEO Howard Schultz said the company needed to improve the mobile app experience to win back customers.
Schultz isn't the only investor upset with Starbucks' performance lately. Activist hedge fund Elliott Management has taken a stake in Starbucks. Narasimhan acknowledged that the company is a Starbucks shareholder and said discussions so far have been constructive.
Outside North America, comparable-store sales fell 7%. In China, Starbucks’ second-largest market, comparable-store sales fell 14% as both average ticket and transactions declined.
Starbucks has faced tougher competition in China from local coffee shops that offer lower prices than the coffee giant. But there are encouraging signs in the country as well. Average daily transactions and weekly sales in China have improved sequentially quarter over quarter, according to Narasimhan.
The company is in the “early stages” of exploring strategic alliances to accelerate its growth in China, Narasimhan said. It is unclear what form such a partnership might take.
Starbucks opened 526 net new stores in the fiscal quarter.
The company reiterated the guidance it had given last quarter. The company expects revenue growth in the low single-digit percentage range and earnings per share growth in the flat to low single-digit percentage range.
