Starbucks is experiencing a challenging start to the Pumpkin Spice Latte season this year.
On Tuesday, the well-known Seattle-based coffee retailer announced that its sales for the fiscal fourth quarter, which concluded on September 29, were below expectations. Additionally, the company stated that it would pause financial projections for the fiscal year 2025, allowing its newly appointed Chairman and CEO, Brian Niccol, the opportunity to evaluate the company’s performance.
The results shared by Starbucks were preliminary, with a complete financial report for the July to September quarter slated for release on October 30, alongside a conference call with investors.
Customer engagement within the U.S. has shown sluggishness, reflected in a decline of 6% in same-store sales, which accounts for locations that have been open for at least a year. The company noted that its expanded offerings for the fall season, including items like the Iced Apple Crisp Nondairy Cream Chai, along with increased in-app promotions, did not incentivize more customer visits. Surprisingly, the Pumpkin Spice Latte, which usually boosts foot traffic and made its return to stores on August 22, failed to generate the expected response.
Looking towards China, Starbucks reported a significant decline in same-store sales, which fell by 14% as consumers opted for cheaper alternatives or cut back on spending.
In a message to stakeholders, Niccol, who previously led Chipotle and began his role at Starbucks last month, expressed optimism, stating that the issues facing Starbucks are “very fixable” and that the brand possesses considerable strengths to leverage.
Niccol emphasized the necessity for improvements in staffing levels, as well as streamlining operations for baristas, particularly during peak morning hours. He mentioned that the mobile ordering system needs adjustments to enhance the café experience rather than overwhelm it. Simplifying the “overly complex menu” was also highlighted as a crucial step.
“We understand how to implement these changes, and we are confident that doing so will encourage more frequent customer visits,” he stated.
Furthermore, Niccol outlined a shift in marketing strategy, suggesting a focus away from just Starbucks Rewards customers, and instead emphasizing the brand’s quality handcrafted drinks and innovative coffee products.
For the quarter from July to September, Starbucks reported a 3% decrease in revenue, totaling $9.1 billion. This figure fell short of the $9.4 billion anticipated by analysts surveyed by FactSet.
Additionally, the company’s adjusted earnings saw a notable decline of 24.5% from the previous year, landing at 80 cents per share, which also underperformed compared to the expected earnings of $1.03 per share from analysts.