The glass is looking half empty for Starbucks (SBUX) this quarter.
For its Q2 earnings, the company missed expectations across the board, posting lower than expected revenue, earnings, and same store sales growth, as customers pulled back on the frequency of their visits and size of their orders.
CEO Laxman Narasimhan called it a “a highly challenged environment,” adding that these second quarter results “do not reflect the power of our brand, our capabilities or the opportunities ahead.”
This is Starbucks’ first quarterly sales decline since 2020, when COVID shutdowns roiled the industry.
Revenue for the second quarter dropped 2% year over year to $8.6 billion. Adjusted earnings per share also came in lower, down 8% to $0.68.
Global same-store sales declined 4% from a year ago, as transactions dropped 6%, which was partially offset by a 2% increase in average ticket size.
Shares of the coffee chain are down more than 10% in after hours trading.
Starbucks attempted to lure in customers with afternoon promotions and new offerings like Lavender Lattes and Spicy Refreshers, but they didn’t appear to move the needle for the coffee giant.
In its North America and US business, same-store sales declined 3%, with foot traffic dropping 7% year over year, though ticket size was up 4%.
For its international business, same-store sales are down 6%, with a 3% decline in foot traffic and ticket size.
China saw the biggest drop, with same store sales down 11%, foot traffic down 8%, and the average ticket size down 4%.
Stores in the US and China make up 61% of the company portfolio.
Conflict in the Middle East was another headwind. Narasimhan shared his concerns about current events and misinformation being spread about the company in an internal memo in mid-December.
In the earnings release, CFO Rachel Ruggeri called it “a difficult quarter” but said the company “learned from our own underperformance and sharpened our focus with a comprehensive roadmap of well thought out actions making the path forward clear.”
The company plans to share more on its 2024 outlook in a company call Tuesday afternoon.
Last quarter, the company said it expected fiscal 2024 revenue growth to be in a range of 7% to 10%, down from the previous range of 10% to 12%. Global and US same-store sales were expected to increase 4% to 6%, down from the previous range of 5% to 7%.
China’s same-store sales growth was expected to come in at low single digits for the remainder of the year, down from 4% to 6%.
Here’s what Starbucks reported, compared to Wall Street estimates, per Bloomberg consensus estimates:
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Adjusted earnings per share: $0.68 versus $0.80
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Revenue: $8.56 billion versus $9.13 billion
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Same-store sales growth: -4% versus 1.46%
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North America: -3% versus 2.05%
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US: -3% versus 2.31%
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International: -6% versus 1.36%
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China: -11% versus -1.62%
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Foot traffic growth: -6% versus -0.27%
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North America: -7%, compared to up 6% in Q2 2023
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International: -3%, compared to up 7% in Q2 2023
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Ticket size growth: 2% versus 2.41%
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North America: 4%, compared to up 5% in Q2 2023
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International: -3%, compared to flat in Q2 2023
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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