Starbucks suspended its financial guidance after it released unexpected results showing a drop in revenue and sharp decline in quarterly earnings.
The preliminary results were published more than one week before schedule. They are the first to be released under the new CEO Brian Niccol who took over the world’s biggest coffee chain just last month.
In its fourth fiscal quarter, global comparable store sales declined 7 per cent on an annual basis as the number of transactions in US stores dropped by a 10th. In the three-month period ending September, net revenues fell by 3 percent to $9.1 billion and earnings per share dropped 25 percent.
The company announced that guidance would be suspended until the end of fiscal year 2025, which has just begun.
Starbucks is struggling because of the high prices for its drinks, and long queues at busy times. The company also faced stiff competition in China – a key market for its growth.
replaced Laxman Narasimhan as CEO in August. Niccol is credited for turning around the burrito-chain Chipotle Mexican Grill. Niccol has outlined a vision for restoring the cozy atmosphere of Starbucks stores in the early days. He said he would focus first on the US stores.
In a Video released Tuesday, Niccol stated that it was “clear” we needed to “fundamentally change our recent strategies” to return growth. He said that he would simplify an “overly complicated” menu, fix pricing structures and change the mobile ordering and payments system to “not overwhelm the cafe experience”.
He said: “We must focus on what makes us unique — an inviting coffee house, where people can gather and enjoy the finest coffee made by our baristas.”
The chain increased its quarterly dividend, from 57 to 61 cents per share. Rachel Ruggeri, chief financial officer of the company, said: “We are aiming to increase our confidence and give some certainty in our efforts to turn around our business.”
The quarter saw a 6 percent decline in comparable sales in US locations, as the higher amount of bills paid by the customers was more than offset by the 10 percent drop in transactions.
The company reported that comparable store sales in China fell by 14 percent, due to “intensified competition” and a “soft macro-environment”, which affected consumer spending.
The full results of the company will be released on 30 October. Starbucks shares were down 3.6% in after-hours trade.
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