Starbucks CEO Commits to Strategic Overhaul Amid Third Consecutive Quarter of Falling Sales

On Wednesday, Starbucks reported quarterly earnings and revenue that fell short of analysts’ expectations due to disappointing sales in its largest markets, the U.S. and China. Previously, the company had released a preliminary report of its quarterly results on October 22 and announced a suspension of its fiscal 2025 outlook. This marks the first report under new CEO Brian Niccol, who joined on September 9 to rejuvenate the struggling business.

“It is clear we need to fundamentally change our strategy to win back customers,” Niccol stated. He outlined a plan focusing on hand-delivering drinks within four minutes, reinstating condiment bars, eliminating extra charges for milk alternatives, and improving mobile order and pay systems and restaurant staffing.

Despite near-term challenges, Niccol remains optimistic about Starbucks' strengths and long-term plan. Initially, the strategy will focus on North America, with plans to better understand the Chinese market for future improvements. Starbucks also plans to reduce new cafe openings and renovations in fiscal year 2025 to focus on redesigns and the broader turnaround.

Shares remained flat in extended trading. Here’s how the company performed compared to Wall Street expectations, based on LSEG analyst surveys:

• Earnings per share: 80 cents vs. $1.03 expected
• Revenue: $9.07 billion vs. $9.36 billion expected

Starbucks' net income for the fiscal fourth quarter dropped to $909.3 million, or 80 cents per share, from $1.22 billion, or $1.06 per share, a year earlier. Net sales fell 3% to $9.07 billion, and global same-store sales decreased 7%, driven by weak demand in the U.S. and China. Worldwide store traffic declined 8% during the quarter.

In the U.S., same-store sales fell 6% due to a 10% drop in traffic. In China, same-store sales plummeted 14% as both traffic and the average ticket declined, with increased competition from local rivals like Luckin Coffee.