Starbucks Aims for Revival as Q1 Earnings Beat Expectations

Seattle, WA - Starbucks Corporation (SBUX) reported its first quarter fiscal year 2025 results, showcasing declines across key metrics but surpassing analysts' estimates.

Financial Performance:

* Revenue remained flat year-over-year at $9.4 billion, exceeding forecasts of $9.32 billion.
* Earnings per share declined 23% to $0.69 compared to the previous year's quarter, outperforming expectations of $0.66.
* The company attributed the earnings decline to strategic investments in CEO Brian Niccol's turnaround plan.

Same-Store Sales and Foot Traffic:

* Global same-store sales witnessed a 4% drop while foot traffic declined by 6%, marking the fourth consecutive quarter of such decline.
* Average ticket size increased by 3%.
* North America and U.S. same-store sales fell 4% year-over-year, with foot traffic decreasing by 8%. This was partly offset by a 4% growth in average ticket.

Back to Starbucks Plan:

* Niccol's "Back to Starbucks" plan prioritizes core coffee products, competitive pricing, and enhanced service.
* The company eliminated additional charges for non-dairy milk and paused price increases as part of this strategy.

Operating Margin and Stock Performance:

* Operating margin contracted by 390 basis points due to increased investments and store expenses.
* Over the past year, Starbucks stock has gained 5%, lagging behind the S&P 500's 24% surge.
* Shares have risen 32% since Niccol's appointment as CEO in August.

Wall Street Expectations:

* Analysts anticipate ongoing negative same-store sales trends.
* Q1 results surpassed these expectations:
* Same-store sales: -4% vs. -5.30%
* North America and US: -4% vs. -5.04%
* US: -4% vs. -4.06%
* International: -4% vs. 6.10%
* China: -6% vs. -9.34%

Industry and Company Developments:

* BTIG analyst Peter Saleh anticipates increased momentum in same-store sales growth, margins, and earnings in the latter part of the year and beyond.
* Starbucks opened 113 stores in North America and 264 internationally during the quarter.
* The company has been undergoing transformations, including the implementation of a Coffeehouse Code of Conduct and corporate layoffs to enhance efficiency.
* Starbucks remains focused on its Chinese operations, which account for 61% of its portfolio, despite facing challenges due to economic stagnation and local competition.
* The company continues to make management adjustments and reorganizations.