Starbucks reported quarterly earnings and revenue that fell below Wall Street expectations. Both domestic and international sales were below estimates. The CEO, Laxman Narasimhan, mentioned “headwinds” including a U.S. boycott and increased discounting by rivals in China, leading to a lowered full-year revenue outlook. Starbucks’ fiscal first-quarter net income was $1.02 billion, or 90 cents per share, up from the previous year. However, earnings per share were 90 cents (adjusted), missing the expected 93 cents. Revenue stood at $9.43 billion, falling short of the expected $9.59 billion. Global same-store sales increased by 5%, below estimates of 7.2%. In North America, same-store sales rose 5%, but U.S. traffic lagged, starting in mid-November, influenced by “misperceptions” about the company’s position on the Israel-Hamas war. The controversy led to Starbucks Workers United’s tweet in support of Palestinians, causing a backlash. Starbucks aims to regain customers through promotions and new offerings. Internationally, same-store sales growth was 7%, missing the expected 13.2%. Sales in the Middle East were impacted by the war. In China, the second-largest market, same-store sales grew by 10%, but the average ticket fell 9%, as Chinese consumers are more cautious. Increased competition from lower-priced rivals like Luckin Coffee has also affected Starbucks in China. Starbucks loaded $3.6 billion onto gift cards this quarter, setting a new record. Despite challenges, the company is targeting promotions and new drinks to recover sales.
