Starbucks reported lower-than-expected profits and suspended its performance guidance, with a 7% decline in Q4 same-store sales. After hours, the stock fell by about 7%｜Financial Report Observer
Due to a decline in consumer spending willingness and a decrease in the number of in-store customers, coupled with limited effectiveness of the company's frequent promotional activities, Starbucks saw a 6% and 14% decline in sales in the United States and China respectively in the fourth quarter. The company also temporarily postponed the release of fourth-quarter guidance, leading to a post-market drop in stock price of around 7%
Consumers are unwilling to spend money, Starbucks' performance declined, with not only EPS falling below expectations, but also a 7% year-on-year decline in Q4 sales, prompting the company to temporarily suspend the release of guidance for the fourth quarter.
After the US stock market closed on October 23, Starbucks announced its preliminary performance for the fourth quarter and full year of the 2024 fiscal year ending September 29, 2024.
1) Key Financial Data:
EPS: Preliminary estimates show a 25% year-on-year decrease in adjusted EPS to $0.80 for the fourth quarter, below analysts' expectations of $1.03.
Revenue: Fourth-quarter revenue fell 3% year-on-year to $9.1 billion, below analysts' expectations of $9.36 billion. Global same-store sales at Starbucks in the fourth quarter declined by 7%, compared to analysts' expected decline of 3.48%. Same-store sales in China in the fourth quarter dropped by 14%, compared to analysts' expected decline of 10.5%. Same-store sales in the US fell by 6%.
Following the financial report announcement, Starbucks' stock price fell by about 7% after the US stock market closed.
Furthermore, due to the upcoming CEO change at Starbucks and the current unfavorable situation, Starbucks has decided to temporarily suspend the release of guidance for the 2025 fiscal year. This will provide time to assess the company's situation, establish key strategies, stabilize the company, and prepare for future growth.
Regarding the poor performance, Starbucks stated that the main reason is a decrease in customer traffic and a decline in consumer spending willingness, and some investments and promotional activities made to attract customers have not been effective. Coupled with the current economic environment, Starbucks' performance has faced additional pressure. Starbucks CEO Rachel Ruggeri said:
"Despite our increased investments, we have not been able to reverse the trend of declining customer numbers, which has put pressure on our revenue and profits. While our efforts to improve efficiency are proceeding as planned, these efforts are not sufficient to offset the impact of the decrease in customers. We are developing a plan to turn around the business, but this will take time. After a 7% decline in sales in the fourth quarter, the company must "fundamentally change" its strategy, focusing on reigniting growth in the Chinese market. We want to strengthen confidence in the company and provide some certainty as we drive business turnaround. Therefore, we have increased dividends."
Starbucks cited that in the US, the 6% decline in same-store sales was due to a 10% decrease in customer visits, although the average transaction amount per visit increased by 4%, it could not fully compensate for the decrease in customer numbers.
While Starbucks is making strategic adjustments, the company still promises to create value for shareholders. Starbucks announced that the board of directors has agreed to increase the quarterly cash dividend from $0.57 per share to $0.61 per share