Starbucks Aims for Resurgence with Positive Q1 Results

Overview:

Starbucks (SBUX) recently reported its first-quarter 2025 financial results, demonstrating resilience amidst industry challenges. While revenue remained stagnant, the company surpassed analysts' earnings projections.

Financial Performance:

* Revenue: $9.4 billion, flat year-over-year
* Earnings Per Share: $0.69, a 23% decrease but higher than expected ($0.66)
* Global Same-Store Sales: 4% decline
* Global Foot Traffic: 6% decline
* Average Ticket Size: 3% growth

Strategic Initiatives:

* "Back to Starbucks" Plan: Focus on core coffee products, improved pricing, and faster service.
* Reduced Promotions: 40% fewer discounted transactions year-over-year.
* Increased Marketing Spend: Doubling marketing investment as a percentage of revenue.
* Menu Simplification: 30% reduction in beverage and food offerings by year-end.
* Enhanced Staffing: Pilot program in 700 stores to address staffing concerns.
* Improved Mobile Orders: Prioritizing enhancements to mobile order functionality.
* Coffee Bean Costs: Minimal impact on Starbucks despite rising costs.

Wall Street Expectations:

* Same-Store Sales: -4% (actual) vs. -5.30% (expected)
* Foot Traffic: -6% (actual) vs. -7.28% (expected)
* Ticket Growth: 3.0% (actual) vs. 1.87% (expected)

Analyst Outlook:

* BTIG analyst Peter Saleh anticipates improving momentum for Starbucks as it continues its turnaround efforts.
* Same-store sales growth, margins, and earnings are expected to improve in the coming months.

China Operations:

* US and China account for 61% of Starbucks' portfolio.
* Challenges in China include stagnant domestic economy and local competition.
* Starbucks China CEO Belinda Wong recently retired.

Operational Changes:

* Implementation of Coffeehouse Code of Conduct, restricting in-store access to paying customers.
* Corporate layoffs planned for early March to enhance efficiency.
* Management shakeups and team reorganizations.