Coffee chain blames “more demanding” customers for sudden drop in sales
Starbucks shares dropped by over 16pc after a sudden drop in sales caused a sell-off.
The trading update revealed that the earnings of the coffee chain had fallen by as customers avoided more expensive coffee.
Starbucks sales fell in March for the first three months since 2020, according to Laxman Nairsimhan, chief executive. He said that customers were “more demanding” about how they spent their money.
Analysts had predicted $9.13bn, but the actual revenue was $8.56bn.
This is the latest blow to the coffee chain whose share price has fallen by over a third during the past year.
In addition to the issue of consumers cutting costs due to high living expenses, Starbucks is also being hit by a boycott of its products linked with Israel’s conflict against Hamas.
The chain sparked anger when it sued an Iowa workers’ union for trademark infringement after a post on social media expressed “solidarity” with Palestine.
Mr Narasimhan claimed in the past that the company was the victim of “misrepresentation of what we are about on social media”.
Starbucks Middle Eastern franchisee announced last month that it would lay off thousands of employees – about 4pc of the workforce – due to a drop in sales brought on by boycotts.
Starbucks also saw a 3pc decline in sales in its US stores in the three-month period ending March. Sales in Starbucks’ international business dropped 6pc including a 11pc decrease in China.
Around 40,000 stores are operated by the company in over 100 countries, with hundreds of thousands working there.
Mr Narasimhan stated on Tuesday that “in a highly challenging environment, the results of this quarter do not reflect our brand’s power, our capabilities, or the opportunities to come.”
It did not meet expectations but we are aware of the challenges and opportunities that lie ahead.