Sales Decline Due to Weakness in North American and Chinese Markets
Nicole CEO "Complete Strategy Overhaul"
U.S. Starbucks announced that it will not provide performance forecasts for the 2025 fiscal year as its sales have declined for three consecutive quarters.
On the 22nd (local time), foreign media such as The Wall Street Journal (WSJ) and CNBC reported that Starbucks announced preliminary results for the fourth quarter (July-September) of the 2024 fiscal year, revealing total sales of $9.1 billion (approximately 12.6 trillion KRW), down 3% from the same period last year. Earnings per share also fell 24% year-over-year to $0.80. This result fell short of market experts' initial expectations of $9.38 billion in sales and $1.035 in earnings per share, marking a decline for the third consecutive quarter.
Analysts attribute Starbucks' crisis largely to declining sales in the U.S. and China markets, which account for 61% of its global stores. In the company's largest market, the U.S., same-store sales dropped 6% year-over-year, and the number of visitors plummeted by 10%. However, the average transaction value increased by 4%. It is pointed out that consumers are increasingly burdened by coffee prices approaching the cost of meals, and the long wait times during peak ordering hours are problematic.
In China, the second-largest market, same-store sales declined by 14%, influenced by an 8% decrease in average transaction value and a 6% drop in visitors. Starbucks explained this as a result of the slowing Chinese economy and intensified competition in the Chinese coffee market. Last year, Starbucks lost its top sales position in China to the Chinese brand Luckin Coffee.
On this day, Starbucks also announced a temporary suspension of performance forecasts for the next fiscal year. The company explained that due to recent CEO changes and poor performance, it needs time to refine its management strategy.
In August, Starbucks dismissed former CEO Laxman Narasimhan after only 17 months, holding him responsible for poor performance, and appointed Brian Niccol, CEO of the fast-food chain Chipotle Mexican Grill, as his successor. Niccol, who took office last month, has stated, "We will return to the original Starbucks," and is reportedly pushing for structural improvements, including replacing the global chief brand officer.
CEO Niccol said in a statement that day, "The fourth-quarter results clearly showed that we fundamentally need to change our strategy to return to growth," adding, "This is what we are doing through the 'Back to Starbucks' plan." He also announced that detailed plans would be disclosed in the earnings report scheduled for the 30th.
Brian Yaburu, an analyst at Edward Jones, said, "By withdrawing the performance forecast, Niccol can reset the board, but in the meantime, it is unclear where the numbers will go," and predicted, "Recovery may take longer than some investors expected. Difficult and challenging times will continue for the next few quarters."
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