Starbucks Corp. (NASDAQ:SBUX) reported preliminary quarterly results on Tuesday that again showed a decline in sales, as corporate profits have been declining for months, weighed down by factors including boycotts of companies linked to Israel.
“Our fourth quarter performance demonstrates that we need to fundamentally change our strategy to get back to growth, and that’s exactly what we’re doing with our Starbucks Return to Business plan,” CEO Brian Niccol said in a statement.
Nicole said additional details on the transformation will be disclosed on the company's earnings call scheduled for Oct. 30. He also noted that the challenges the company faces are solvable, and emphasized that Starbucks has strengths that can be built upon.
Sales decline
The company reported a 3% decline in net sales to $9.1 billion and reported adjusted earnings per share of 80 cents. Analysts had expected earnings of $1.03 per share and revenue of $9.38 billion, sending the company’s shares down more than 4% in after-hours trading.
This is the third consecutive quarter in which the company has reported a decline in its store sales, which fell 7%, the largest decline since the pandemic began. The company said that the decline was mainly due to a decline in demand, especially in North America, where store sales fell 6%. Despite increased investments in promotions and the mobile app, store visits fell 10%.
In China, the company's second-largest market, same-store sales fell 14%. The company attributed the decline to increased competition, changing consumer behavior, and a change in the company's strategy in the Chinese market.
New CEO
Starbucks replaced CEO Lakshman Narasimhan with Chipotle CEO Brian Niccol in August after the company suffered heavy losses in recent months due to boycott campaigns that hurt its sales.
Narasimhan took over as CEO in March 2023. The coffee giant’s performance has suffered this year, hurt by weak sales in the United States and China, its two largest markets, as well as weak sales in the Middle East due to boycott campaigns.
Since October 7, many Western products and brands in Arab countries, and around the world, have been subject to boycott campaigns as a result of their support for the Israeli war on the Gaza Strip. Some of the companies targeted by the boycott campaigns are seen as having taken pro-Israel positions, or some of them have financial ties to Israel or investments there.
Many consumers in the Middle East and the United States have avoided Starbucks after the company took legal action in October against the United Workers Organization for using the Starbucks name and a similar logo after a post from the union's social media account in October expressed solidarity with the Palestinian people before it was deleted.
The union represents more than 9,000 Starbucks employees across about 360 U.S. stores, and aims to demand better wages, hiring and schedules from the coffee giant.
