Starbucks glass art in a Tokyo store.
Jakub Polzycki | Nurphoto | Getty Images
Starbucks on tuesday Reporting quarterly earnings The results fell short of analyst expectations due to weak demand for cafes in the U.S. and overseas.
Still, the results weren’t as bad as investors feared, with the company’s shares up more than 5% in after-hours trading.
Here’s how the company reported compared to Wall Street expectations, based on an analyst survey by LSEG.
- Adjusted earnings per share: 93 cents (expected: 93 cents)
- Revenue: $9.11 billion (prediction: $9.24 billion)
The coffee giant said third-quarter net income attributable to the company was $1.05 billion, or 93 cents per share, down from $1.14 billion, or 99 cents per share, a year earlier.
Excluding other items, Starbucks earned 93 cents per share.
Net Sales Dropped It increased 1% to $9.11 billion. The company’s same-store sales fell 3% in the quarter due to a 5% decrease in transaction volume.
Customer traffic at U.S. stores fell again this quarter, down 6%. Domestic same-store sales fell 2%, hurt by higher average customer spending. Last quarter, executives discussed plans to turn around the struggling U.S. business, including offering discounts and new drinks to lure back customers who had drifted away from the chain.
Chief Executive Officer Lakshman Narasimhan said on Tuesday that while more customers are buying the company’s packaged coffee from grocery stores, a “challenging consumer environment” is weighing on sales in its cafes.
Still, the company already sees opportunities in its U.S. business, including the success of new products. The company’s Summer Berry Refreshers drink, which contains tapioca pearls, set a new record for its first week on the market. Next quarter will also see the return of the Pumpkin Spice Drink, a perennial favorite since its launch more than 20 years ago.
The company now lets customers order and pay through its mobile app, even if they don’t join the loyalty program. Improvements to the app have helped the company better predict when orders will be ready, reducing customer complaints. In a letter posted to LinkedIn after the company’s disappointing last quarter, former CEO Howard Schultz said the company needed to improve its mobile app’s usability to win back customers.
Schultz isn’t the only investor unhappy with Starbucks’ recent performance. Activist hedge fund Elliott Management holds shares in the company. Narasimhan confirmed that the firm is a shareholder in the company and said discussions so far have been constructive.
Outside North America, same-store sales fell 7%. In China, Starbucks’ second-largest market, same-store sales fell 14% as average ticket prices and transaction values both declined.
Starbucks faces stiff competition in China from local coffee shops that offer cheaper prices than the coffee giant, but there are some bright spots in the country: Narasimhan said the company’s average daily transactions and weekly sales in China have increased sequentially quarter-over-quarter.
Narasimhan said the company is in the “early stages” of exploring strategic partnerships to accelerate its growth in China, though it’s unclear what form those partnerships might take.
Starbucks opened 526 new stores during the fiscal quarter.
The company reiterated the outlook it gave last quarter: it now expects revenue growth to be in the low single digits and earnings per share growth to be in the flat to low single digit range.