Throughout the Covid pandemic, various supply chain issues, and high inflation, Starbucks could still count on its consumers to purchase its iced oat milk lattes. But that economic certainty may be in doubt after the coffee giant reported weaker-than-expected revenue and profits in the latest quarter.
Starbucks said on Tuesday that global revenue fell 1.8 percent to $8.56 billion, while net profit fell 15 percent to $772.4 million in the three months ended March 31. March. Company executives blamed some of the declines in the United States on bad weather. and fewer customer visits to your stores.
Starbucks also reduced its full-year revenue and profit growth, reflecting the quarter’s difficulties. In after-hours trading, its shares fell more than 12 percent.
“In a highly challenging environment, this quarter’s results do not reflect the power of our brand, our capabilities or future opportunities,” Starbucks CEO Laxman Narasimhan said in a statement. “It did not meet our expectations, but we understand the specific challenges and opportunities before us.”
Comparable sales in the quarter fell 3 percent in North America and 6 percent in international markets, driven by an 11 percent drop in China, where Starbucks has made a big bet on its growth. Executives said the economic recovery in China had been “more eventful” than they expected.
During the pandemic and even in the post-pandemic world, when many restaurants struggled with supply chain issues and inflation, Starbucks’ growth seemed unstoppable, fueled by its Gen Z customers. Even as traffic at other restaurants fell to As food and beverage prices rose higher and higher, Starbucks customers remained loyal, lining up in stores and at drive-throughs.
Still, Wall Street analysts and investors have been closely monitoring trends within the chain’s stores, looking for cracks in customer visits or spending that could indicate Starbucks is not immune to a slowdown in business. consumer spending, particularly low-income people.
In comments to Wall Street analysts after the market closed, Narasimhan said Starbucks saw that some customers in the United States were being more careful about spending.
“If I look at the headwinds we see in the market, particularly with the consumer and the pressures they face, they were sharper and more accelerated than we expected,” he said.
Narasimhan and other executives said they hoped to increase traffic and sales by improving supply chain issues to ensure hot food and drinks remained available and using their app to drive personalized promotions for customers who visited their stores only occasionally.
Executives attributed the shortfall in China, where Starbucks has more than 7,000 stores and plans to continue expanding, to a decline in traffic from these casual customers, particularly in the afternoon and evening. Executives also said the market was being shaken by competitors in China offering less expensive drinks, but said Starbucks would continue to focus on wealthier consumers willing to spend on premium coffee and tea.