Starbucks takes a Q2 brew$ing
Java giant Starbucks is starting to feel the financial pinch as inflation-battered customers forgo pricey drinks like their vente triple-soy lattes for lowerpriced options.
Starbucks CEO Laxman Narasimhan cited inflation pressures as a factor behind its lackluster quarterly earnings report.
“In this environment, many customers have been more exacting about where and how they choose to spend their money, particularly with stimulus savings mostly spent,” Narasimhan said on the firm’s Tuesday call.
On Wednesday, shares in the Seattle-based chain plunged 16% after Narasimhan warned its cafes will continue to underperform in 2024.
For the fiscal second quarter ended March 31, Starbucks said that samestore sales in the US decreased 3% as foot traffic plunged a disappointing 7%, marking the second consecutive quarter that the coffee chain’s home market has struggled.
“In a highly challenged environment, this quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead,” Narasimhan said.
Starbucks also cited “higher inflation” as a “risk factor” moving forward, which comes after news that Vietnam’s robusta coffee bean farmers are facing a supply crunch caused by the El Niño weather phenomenon that’s pushed temperatures higher — causing weaker harvests and pricier coffee beans.
Revenue dropped 2% to $8.56 billion in the quarter — falling short of the $9.13 billion sum expected.
Net revenues in North America rang in at $6.4 billion — flat compared to the year-ago period thanks to a 4% increase in the average amount a customer spends per transaction.
Globally, Starbucks’ same-store sales fell 4% as traffic similarly dipped 6%. Wall Street was anticipating a same-store growth of 1%, per CNBC, citing StreetAccount estimates.