May 19, 2024

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Starbucks is revising its 2024 guidance, after badly missing second-quarter earnings estimates

Starbucks is revising its 2024 guidance, after badly missing second-quarter earnings estimates

The glass seems half empty for Starbucks (SBUX) this quarter.

For second-quarter earnings, the company beat expectations across the board, reporting lower-than-expected revenue and earnings and same store sales growth, as customers pulled back on the frequency of their visits and the volume of their orders.

CEO Laxman Narasimhan described it as a “challenging environment”.

The macro headwinds, he added during the earnings call, “particularly around the pressures that consumers face, especially with casual customers…that's where the challenge lies.”

This is the first quarterly decline in Starbucks sales since 2020, when coronavirus lockdowns rocked the industry.

Second-quarter revenue fell 2% year over year to $8.6 billion. Adjusted earnings per share fell 8% to $0.68.

Global store sales were down 4% compared to last year, with transactions down 6%, partially offset by a 2% increase in average ticket size.

Shares of the coffee chain fell more than 12% in after-hours trading.

Starbucks has tried to attract customers with afternoon promotions and new offerings like Lavender Lattes, which Narasimhan said “performed about as well last quarter as the PSL (pumpkin spice latte).”

However, the menu innovations do not seem to have brought about a change in the coffee giant.

In its North American and US businesses, same-store sales fell 3%, with traffic down 7% year-on-year, despite ticket volume up 4%.

To attract casual customers, Starbucks plans to add new promotions to its app. In the US, 31% of all Q2 transactions were made through its app. However, the number of active 90-day loyalty members fell to 32.8 million, compared to 34.3 million last quarter.

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Narasimhan also pointed to speed of service as an area of ​​opportunity. Currently, many customers do not complete their app orders due to long wait times or product unavailability. The company is “intensifying its investments in the supply chain to further improve availability,” he said.

New products such as boba tea-like pearls, low- or no-calorie energy drinks, and more sugar-free juices are also available.

For its international business, same-store sales fell 6%, with a 3% decline in traffic and ticket volume. As with McDonald's, Starbucks said the conflict in the Middle East had affected international sales.

Narasimhan shared his concerns about current events and misinformation being spread about the company on An internal memo In mid-December.

But China saw the biggest decline, with same-store sales down 11%, traffic down 8%, and average ticket size down 4%.

“Performance was impacted by a decrease in the number of casual customers, changing holiday patterns, a high promotional environment, and a return to normal in customer behaviors following the reopening of the market last year.” Narasimhan said on the call.

Stores in the US and China make up 61% of the company's portfolio.

The company also revised its forecasts for 2024 for the third time this fiscal year.

As of the second quarter, Starbucks expects 2024 global revenue growth in the low single digits, down from the previous range of 7% to 10%, which itself was below previous guidance of 10% to 12%.

Same-store sales globally and in the U.S. are expected to see a low-single-digit to flat decline, down from the previous range of 4% to 6%. Same-store sales in China are expected to see a single-digit decline, down from previously expected low growth.

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Starbucks originally projected same-store growth in the mid-single digits in its markets.

Here's what Starbucks reported, compared to Wall Street estimates, according to Bloomberg consensus estimates:

  • Adjusted earnings per share: $0.68 vs $0.80

  • he won: $8.56 billion compared to $9.13 billion

  • Same store sales growth: -4% vs. 1.46%

    • north america: -3% vs. 2.05%

    • we: -3% vs. 2.31%

    • international: -6% vs. 1.36%

    • China: -11% vs. -1.62%

  • Traffic growth: -6% vs. -0.27%

    • north america: -7%, compared to a 6% increase in the second quarter of 2023

    • international: -3%, compared to a 7% increase in the second quarter of 2023

  • Ticket size growth: 2% vs 2.41%

    • north america: 4%, compared to a 5% increase in the second quarter of 2023

    • international: -3% compared to the second quarter of 2023

Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke De Palma Or email her at [email protected].

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