Starbucks Faces Disappointing Earnings Due to U.S. Boycott and Cautious China

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.