Starbucks Strives for Comeback in Q1 2025

Starbucks (SBUX) reported its first quarter results for fiscal year 2025 on Tuesday, demonstrating progress in its turnaround efforts.

Financial Results

* Revenue: Flat at $9.4 billion, exceeding expectations of $9.32 billion
* Earnings per share: $0.69, a 23% decrease but above the estimated $0.66
* Global same-store sales: Decline of 4%
* Global foot traffic: Decline of 6%
* Average ticket size: Increase of 3%

Turnaround Strategy

CEO Brian Niccol highlighted the company's "Back to Starbucks" plan, which includes:

* Focus on core coffee products
* Enhanced pricing
* Faster service

Niccol emphasized the need for continued improvements, stating that "we still have much work to do."

Marketing and Menu Changes

Starbucks plans to:

* Double marketing spend as a percentage of revenue
* Reduce menu offerings by 30%
* Enhance mobile orders

CFO Rachel Ruggeri downplayed the impact of soaring coffee bean costs, noting that they account for only 10-15% of product costs.

Wall Street Expectations

Analysts had anticipated more severe declines in same-store sales:

* Same-store sales: -4% actual vs. -5.30% expected
* Foot traffic: -6% actual vs. -7.28% expected

Industry Outlook

Analyst Peter Saleh predicts momentum in Starbucks' turnaround strategy, particularly in same-store sales growth and margins.

Operational Changes

* Store openings: 113 in North America, 264 internationally
* Coffeehouse Code of Conduct implemented, restricting seating and restrooms to paying customers
* Corporate layoffs planned for operational efficiency
* Management shakeups and team reorganizations

China Focus

Starbucks continues to navigate challenges in China, which comprises 17,049 stores. CEO Niccol recently visited the market and acknowledged its potential. Molly Liu, former co-CEO, will lead the Chinese operations.

Overall, Starbucks is making progress in its turnaround efforts, despite ongoing challenges. Investors can monitor the company's continued execution of its strategy and its ability to capitalize on opportunities in key markets, particularly China.