Starbucks Strives for Comeback with 'Back to Starbucks' Plan

Starbucks Corporation (SBUX) reported its Q1 FY2025 results, showcasing mixed performance despite meeting expectations.

Financial Performance

Revenue remained flat at $9.4 billion, exceeding estimates of $9.32 billion. Earnings per share declined 23% to $0.69, but surpassed expectations of $0.66. The decline was attributed to investments in the "Back to Starbucks" turnaround plan.

Same-Store Sales and Foot Traffic

Global same-store sales and foot traffic declined by 4% and 6%, respectively, marking the fourth consecutive quarter of such decline. However, average ticket size grew by 3%.

North America and US Performance

North America and US same-store sales decreased by 4%, with foot traffic declining by 8%. Nonetheless, average ticket size increased by 4%. Starbucks eliminated extra charges for non-dairy milk and paused price increases as part of its value proposition improvement strategy.

Operating Margin and Investments

Operating margin contracted by 390 basis points, driven by deleverage and investments in Niccol's strategy, store wages, benefits, and hours.

Market Performance

Starbucks stock has risen 5% in the past year, underperforming the S&P 500's 24% gain. However, shares have climbed 32% since Niccol's appointment as CEO in August.

Analyst Expectations

Analysts anticipate continued negative same-store sales trends, but project improved momentum in subsequent quarters for growth, margins, and earnings.

International Business

Starbucks faces challenges in China, with sales declining by 6%. The company is focused on its Chinese operations and has recently implemented a Coffeehouse Code of Conduct.

Ongoing Changes

Starbucks is undergoing multiple changes, including staff layoffs, management shakeups, and the implementation of a Coffeehouse Code of Conduct. The company's turnaround efforts are ongoing and subject to future updates.