Starbucks saw its shares drop by 6% in after-hours trading following the release of its preliminary Q4FY24 results. The company reported a 3% decline in revenue year-on-year, falling to $9.1 billion, while earnings per share (EPS) dropped by 24% to $0.80.
The disappointing results were driven by declining same-store sales in both the US and China, Starbucks’ two largest markets. With a 6% drop in US foot traffic and a 14% decline in same-store sales in China, investors are concerned about the company’s ability to rebound in the face of intensified competition and soft consumer spending.
Q4FY24 Performance Breakdown
Starbucks reported a 10% decrease in US foot traffic, though the average ticket size increased by 4%. This slight improvement in average spending wasn’t enough to offset the lower number of transactions, leading to a 6% decline in same-store sales.
In China, the company struggled even more, reporting a 14% drop in same-store sales, driven by 6% lower foot traffic and 8% smaller average ticket size.
| Metric | Q4FY23 | Q4FY24 | YoY Change (%) |
|---|---|---|---|
| Revenue | $9.38 billion | $9.1 billion | -3% |
| Earnings per Share (EPS) | $1.05 | $0.80 | -24% |
| US Same-Store Sales Growth | +4% | -6% | -10% |
| China Same-Store Sales Growth | +12% | -14% | -26% |
Starbucks’ Strategic Shift
To address the challenges, Brian Niccol, Starbucks’ new CEO, has announced a strategic shift for the company. Starbucks plans to re-strategize and simplify its menu offerings, improve its pricing, and refocus its marketing efforts to attract a broader customer base, not just its Rewards Program members.
Niccol emphasized the need to fix pricing perceptions and increase the frequency of customer visits, especially in key markets like the US and China.
Starbucks’ Struggles in China
China has become an increasingly competitive market for Starbucks, as the company faces intensified competition from local coffee chains and macroeconomic challenges that have affected consumer spending.
Starbucks is currently re-evaluating its strategy in China, including plans to introduce new promotions and localized menu offerings to regain its lost market share. Analysts are watching closely to see if the company can navigate the soft macro environment in China and return to growth.
Conclusion: What Lies Ahead for Starbucks?
Starbucks’ Q4 results highlight the company’s challenges in both the US and China. While its long-term brand strength remains solid, the short-term outlook is clouded by declining sales and intensified competition.
Investors will be keenly watching how Brian Niccol’s leadership will steer the company through these challenges and set Starbucks back on a path to growth.
Disclaimer
This article is for informational purposes only. Please consult a financial advisor for professional investment advice.
