Starbucks lowers guidance after weak Q2
(AP) — Starbucks lowered expectations for its full-year sales and profit Tuesday after a disastrous quarter that saw a slowdown in store visits across the world.
The Seattle coffee giant said revenue for the January-march period dropped 2% to $8.56 billion. That was far short of Wall Street's forecast of $9.12 billion, according to analysts polled by Factset. It was the first time since the end of 2020 that the company saw a drop in quarterly revenue.
"Our performance this quarter was disappointing and did not meet our expectations," Starbucks CEO Laxman Narasimhan said during a conference call with investors. Shares in Starbucks Corp. tumbled 12% Tuesday in afterhours trading.
Starbucks said a mix of issues impacted sales. In the U.S., the company saw a sharper and faster decline in consumer confidence and spending than it had anticipated. The Conference Board, a business research group, said Tuesday that U.S. consumer confidence fell for the third straight month in April as consumers continue to confront elevated prices and high interest rates.
Bad weather also closed some U.S. stores briefly during the quarter, Starbucks said.
In China, Starbucks said the POSTCOVID recovery has been choppy, and it's also seeing increasing price pressure from competitors.
Starbucks is also facing ongoing boycott of its stores for its perceived support of Israel in the war in Gaza. Customers in the Middle East and elsewhere began boycotting the brand in the fall after it sued Workers United, the union organizing its workers, over a pro-palestinian message posted on a union social media account.
Starbucks has said that the lawsuit was aimed at stopping the union from using the company's name and logo, which it says confuses customers. Starbucks and the union have paused the court case and are now in mediation. But the company has also taken steps to undo the damage. Last month, Starbucks donated $3 million to World Central Kitchen to provide food aid in Gaza.
Starbucks said its same-store sales — or sales at stores open at least a year — dropped 4% in its fiscal second quarter. Wall Street had expected a 1% increase, according to analysts polled by Factset.
In the U.S., customers spent more per visit, but that wasn't enough to overcome a 7% decline in transactions. In China, the company's secondlargest market, same-store sales plunged 11%.