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Starbucks has recorded a second straight quarterly drop in sales, underlining the pressures on senior managers already contending with an activist shareholder and scrutiny from the company’s charismatic former boss.
The world’s largest coffee chain cited a “cautious consumer environment” as it said its global comparable sales fell by 3 per cent in the third quarter that ended in June, following a 4 per cent decline in its previous quarter. Analysts had expected the measure, which includes cafés open for at least 13 months, to show a fall of about 2.4 per cent in the third quarter.
The disappointing results come as Starbucks negotiates with activist Elliott Investment Management, which has been seeking changes at the $85bn company in which it has amassed a stake.
Starbucks’ board and management have also faced public critiques from Howard Schultz, the former three-time chief executive who built up the company after first taking the reins in 1985 and remains its sixth-largest shareholder.
Laxman Narasimhan, CEO since early 2023, has been working to win back customers whose spending power has been eroded by inflation. In China, a critical growth market, Starbucks has struggled in the face of multiplying competition and a sluggish economy.
The group’s net revenues for the quarter fell 0.6 per cent to $9.1bn, below Wall Street expectations of $9.2bn. Net profit dropped by 7.6 per cent to $1.05bn, marginally above consensus.
To boost demand, Starbucks has launched new deals and promotions such as $5 combos of coffee and a croissant.
Narasimhan said a three-part action plan was “beginning to work and driving operational improvements that we expect to improve financial performance”.
Rachel Ruggeri, chief financial officer, said its efficiency efforts were “tracking ahead of expectations” but had been partially offset by “investments associated with the cautious consumer environment”.
The company said that its operating profit margin shrank by 0.6 percentage points year over year in the quarter, to 16.7 per cent. This was “primarily driven by increased promotional activity”, raising wages for baristas and “deleverage”, or cutting debt.
In China, comparable sales slid by 14 per cent, Starbucks said, reflecting lower amounts paid per visit and fewer transactions overall.
