Starbucks Corp (SBUX) shares took a tumble in after-hours trading on Tuesday, following the release of a disappointing preliminary report for the fourth quarter. The coffee giant reported that it expects consolidated net revenues to decline by 3% and global comparable sales to fall by 7% for the quarter. Furthermore, Starbucks announced it would be suspending its guidance for the full fiscal year 2025.
The company attributed its weak performance to a significant decline in North American revenues, specifically a 6% drop in U.S. comparable store sales. This decline was driven by a 10% decrease in comparable transactions. Adding to the challenges, China’s comparable sales fell 14%, impacted by an 8% decline in average ticket and a 6% drop in comparable transactions.
Despite the difficulties, Starbucks is taking steps to address the situation. The company outlined a plan dubbed ‘Back to Starbucks’ which aims to revive growth. As part of this initiative, Starbucks has also increased its quarterly cash dividend from 57 cents to 61 cents per share.
“Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth and that’s exactly what we are doing with our ‘Back to Starbucks’ plan,” said Brian Niccol, chairman and CEO of Starbucks.
Niccol, who took over as CEO in September, emphasized that the team is already working diligently on the turnaround plan. While providing limited details, he invited investors to listen to his initial thoughts on the company’s investor relations website.
The pre-announcement of these results came as a shock to analysts who had been expecting Starbucks to report fourth-quarter earnings of $1.03 per share and revenue of $9.375 billion. The company plans to release its audited fourth-quarter results after the market closes on October 30.
Despite the challenging quarter, Starbucks remains committed to returning to growth and providing value to its shareholders. The company’s announcement highlights the ongoing struggles facing businesses operating in a complex and volatile economic environment. It also underscores the importance of adapting to changing market conditions and investing in strategies that drive long-term success.