Fewer customers visited Starbucks last quarter amid what company executives called a “highly challenged environment,” the company said on Tuesday, hurting its sales and sending its stock plunging.
U.S. same-store sales declined 3% in the company’s fiscal second quarter, driven entirely by a 7% decline in transactions.
Starbucks received no help from international markets, either, as same-store sales outside North America declined 6% as both transactions and average ticket declined 3%. China was a particular problem, with same-store sales in that market down 11%.
The performance led the company to lower its expectations for revenues and same-store sales for the year. Starbucks now expects flat to low single-digit declines in U.S. same-store sales this year, after initially expecting growth of 4% to 6%. It also lowered expectations for revenue, China same-store sales and global store growth.
The results sent Starbucks’ stock plunging. It fell 12% in after-hours trading on Tuesday.
“Our performance this quarter was disappointing and did not meet our expectations,” CEO Laxman Narasimhan said on the company’s earnings call Tuesday. “The results do not reflect our strengths, capabilities or the opportunities in front of us.”
For Starbucks, it was the first negative performance since 2020, when the Seattle-based chain shut down its coffee shops for dine-in service due to the pandemic. You have to go back another decade before that to find a negative quarter for Starbucks in the U.S.
Starbucks has faced challenges heading into 2024, as sales weakened late last year as occasional customers largely abandoned the chain. At least part of that problem was blamed on “misperceptions” on the company’s stance on the Gaza conflict. Bad weather and the company’s fight with organized labor may have also played a role.
Many of those challenges continued into the first quarter. And then the company faced another challenge, as bad weather hurt sales by nearly 3%. But the occasional customer continued to abandon the chain.
Executives also said that a “more cautious consumer” influenced the chain’s sales weakness. “None of these are excuses,” Narasimhan said.
Revenues declined 2% to $8.6 billion. Earnings per share declined 14% to 68 cents. But membership in the company’s Starbucks Rewards loyalty program increased 6% to 32.8 million.
Starbucks did generate more sales through mobile order and pay, which accounted for 31% of sales in the quarter. The company’s introduction of lavender-flavored beverages also performed well, nearing the popularity of its annual Pumpkin Spice Latte introduction.
The company hopes that more innovation, operations improvements and other changes can convince customers to come in more often. Among the changes: It plans to make mobile order and pay available to all customers in July, rather than just members of the loyalty program.
UPDATE: This story has been updated to include information from the company’s earnings call.
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