Starbucks Achieves Same-Store Sales Growth After Nearly Two Years
Starbucks reported a 1% increase in global same-store sales for the fiscal fourth quarter ended September 28, marking its first growth in this metric in almost two years. The improvement was primarily driven by international markets, while U.S. same-store sales remained flat over the quarter but turned positive in September and sustained momentum into October. Wall Street analysts had anticipated declines of 0.3% globally and 0.9% in the U.S., making the results a notable beat. CEO Brian Niccol credited the progress to the company’s “Back to Starbucks” turnaround strategy, now one year in effect.
Quarterly Financial Results
Starbucks posted revenue of $9.57 billion, surpassing analyst expectations of $9.35 billion. However, adjusted earnings per share (EPS) came in at 52 cents, below the forecasted 56 cents. The company reported net income attributable to Starbucks of $133.1 million, or 12 cents per share, a significant decline from $909.3 million, or 80 cents per share, in the previous year. The adjusted EPS figure excludes restructuring costs, litigation settlements, and other one-time items. During the quarter, Starbucks closed 627 locations and laid off approximately 900 non-retail employees as part of its ongoing restructuring efforts.
Operational Challenges and Labor Investments
Starbucks has made significant investments in labor, including adding assistant store managers to many North American locations. These increased labor costs adversely affected operating margins during the quarter. To enhance customer experience and reduce service times, the company has focused on delivering orders in under four minutes. Over 80% of company-operated stores in North America now meet this target, contributing to increased customer traffic following the launch of the fall menu.
Strategic Marketing and Customer Engagement
Starbucks shifted its marketing strategy away from promotions and limited-time offers to emphasize its core coffee products and innovative items like protein-packed cold foam. This approach has helped regain some U.S. customers, reflected in a 1% growth in 90-day active Starbucks Rewards members both quarter-over-quarter and year-over-year.
International same-store sales rose 3%, driven by a 6% increase in customer traffic. In China, Starbucks’ second-largest market, same-store sales grew 2%, with traffic up 9%. To counter competition from local brands offering cheaper beverages, Starbucks has lowered prices on many iced drinks in China. The company is also considering selling a stake in its China business after years of sales challenges. CEO Niccol indicated strong interest from multiple high-quality partners and affirmed Starbucks’ intention to retain a meaningful stake, underscoring confidence in the region’s long-term potential.
“We’re a year into our ‘Back to Starbucks’ strategy, and it’s clear that our turnaround is taking hold,” said CEO Brian Niccol.
“Turnarounds are difficult to forecast, and while we have good reason to believe that our U.S. company-operated same-store sales should build through the year, we also know that recoveries are not always linear,” CFO Cathy Smith cautioned.
FinOracleAI — Market View
Starbucks’ first positive same-store sales growth in nearly two years signals a tentative recovery, driven by international markets and early signs of stabilization in the U.S. The company’s strategic focus on operational efficiency, customer experience, and targeted marketing is beginning to show results, although margin pressures from restructuring and increased labor costs remain challenges.
- Opportunities: Continued momentum in U.S. same-store sales; growth potential in China through strategic partnerships; innovation in product offerings enhancing customer appeal.
- Risks: Uncertainty in the pace of U.S. recovery; margin compression from labor investments and restructuring; competitive pressures in key international markets.
Impact: Starbucks’ results provide cautious optimism for investors, highlighting progress in turnaround efforts but underscoring ongoing challenges ahead.
