Starbucks Faces Pricing Pressure Amid Declining Sales
Analysts at JP Morgan highlight the issue of Starbucks' perceived high pricing, suggesting a gap in consumer perception compared to competitors. Data shows lower prices at Dunkin' Donuts and Dutch Bros. for similar products, prompting concerns about Starbucks' pricing structure.
Despite the introduction of free in-store refills and ceramic mugs to enhance the customer experience, Starbucks' recent earnings report reveals a 4% decline in global same-store sales, with North America and US sales also dropping 4%. International sales face challenges in key markets like China, with same-store sales declining 6% year over year.
Starbucks' operating profit margins in North America and international segments have fallen significantly. The company has withdrawn guidance for sales and earnings for the current fiscal year, indicating the challenges ahead. CEO Brian Niccol is exploring measures to address pricing concerns and streamline the mobile order and pay process to reduce customer frustration.
Analysts from Citi believe Starbucks' efforts to maintain price parity on non-dairy milk and reduce promotional activities will assist in preserving the brand's premium positioning while addressing value perception. They also expect further improvements in price perception as Niccol plans to revise pricing strategy for customization options.