Starbucks (SBUX 0.20%), the global coffeehouse chain headquartered in Seattle, presented its second-quarter earnings report on April 30, 2024.
Analysts' expectations were not met as the company reported earnings per share (EPS) of $0.68 against predictions of $0.80. Revenue also missed forecasts, with $8.6 billion reported against an anticipated $9.1 billion.
This fiscal quarter reflects challenges in both profitability and market growth for the company compared to the same period last year.
| Metric | Q2 FY24 Results | Q2 FY24 Estimates | Q2 FY23 Results | % Change from Q2 FY23 |
|---|---|---|---|---|
| EPS (non-GAAP) | $0.68 | $0.80 | $0.74 | (8%) |
| Revenue (billions) | $8.6 | $9.1 | $8.7 | (2%) |
| Global Comparable Store Sales | -4% | N/A | 12% | N/A |
| Net New Stores | 364 | N/A | 464 | (22%) |
NON-GAAP DATA FROM THE COMPANY'S SEC FILINGS.
Starbucks at a glance
Established in 1971, Starbucks has grown to become a global phenomenon, known not just for its coffee but also as a place for community and connection. As of the second fiscal quarter of 2024, it operates and licenses nearly 39,000 stores worldwide, making it the largest coffeehouse chain globally. Its business model includes both company-operated and licensed stores, along with selling packaged coffee products through various distribution channels.
Recently, Starbucks has emphasized digital innovation, ethical sourcing, and global store expansion, especially in the massive and largely untapped Chinese market. These focuses are crucial for the company's sustained growth and market leadership in the competitive and ever-evolving coffee industry.
Second-quarter highlights
The quarter was characterized by both operational and financial challenges. Global comparable store sales dropped by 4%, a significant decline, reflecting lower customer foot traffic and per-visit engagement. This was partly offset by the opening of 364 new stores, demonstrating continued efforts in market expansion despite short-term hurdles.
In its largest market, North America, Starbucks saw flat revenue year over year, with a 3% decline in comparable store sales. The international segment fared worse, with a 5% revenue decrease and an 11% decline in China's comparable store sales. However, the company remains optimistic, pointing to initiatives like the loyalty partnership with Bank of America as avenues for future growth.
Looking ahead
Looking forward, Starbucks management has reiterated confidence in their long-term strategy, anticipating improvements from their ongoing initiatives. They've highlighted areas such as global store expansion and digital innovation as key drivers for future growth. Although the second quarter's performance was underwhelming, these strategic areas, along with a strong focus on product quality and ethical sourcing, are expected to steer Starbucks back toward its former long-term growth trajectory.
Investors are encouraged to watch for improvements in comparable store sales, efficiency gains from digital initiatives, and successful market penetration, especially in promising focus regions like China. These factors will be critical in evaluating Starbucks' ability to rebound from the current slowdown and capitalize on its global brand strength.
