Starbucks reported another drop in sales on Tuesday and suspended its guidance for fiscal year 2025, citing recent leadership changes and the need to revisit its strategy.
According to a preliminary release, same-store sales declined 7% year-over-year in the fourth quarter, with revenue falling 3% to $9.1 billion and earnings per share down 24% to 80 cents.
Sales fell in the US and China
US same-store sales were down 6%, with a 10% decrease in the number of customer transactions, offset slightly by a 4% rise in average ticket size.
In China, a strategic growth market for Starbucks, same-store sales dropped by 14% due to lower transaction volumes and a declining average ticket size.
Starbucks CFO Rachel Ruggeri, said: “Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top-line and bottom-line. While our efficiency efforts continued to produce according to plan, they were not enough to outpace the impact of the decline in traffic.”
“We are developing a plan to turn around our business, but it will take time. We want to amplify our confidence in the business, and provide some certainty as we drive our turnaround. For that reason, we have increased our dividend,” Ruggeri added.
Strategy Shift: “Back to Starbucks”
Newly appointed CEO Brian Niccol emphasized a “Back to Starbucks” strategy, which involves returning to basics and focusing on the customer experience and connection. Niccol wants to reestablish the brand’s core identity as a welcoming community coffeehouse.
He also recognized the need to simplify store operations, boost efficiency and improve customer and partner experiences. Plans may include refining mobile order systems to avoid disrupting in-café visits, addressing bottlenecks, and equipping baristas with the tools needed to maintain high service quality.
“I’m convinced that if we get back to Starbucks — with a focus on coffee and customers combined with a welcoming coffee house experience created by our green apron partners — we will remind people of why they love Starbucks. They will visit more often, and we will return the company to strong growth. Getting “Back to Starbucks” is our plan, and we’ll share our progress as we go,” Niccol said.