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Home»Finance»Starbucks earnings disappoint as CEO Niccol’s strategy faces US hurdles
Finance

Starbucks earnings disappoint as CEO Niccol’s strategy faces US hurdles

May 1, 2025No Comments3 Mins Read
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Starbucks earnings disappoint as CEO Niccol's strategy faces US hurdles
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(This April 29 story has been corrected to say that the Siren System retailer revamp program was launched by Howard Schultz, not Laxman Narasimhan, in paragraph 4)

By Juveria Tabassum

(Reuters) – Starbucks faces challenges in reviving its enterprise, CEO Brian Niccol stated on Tuesday, after the espresso big posted disappointing international comparable gross sales and revenue with inflation and financial uncertainty driving up prices and dampening U.S. demand.

Buyers have positioned their bets on Niccol’s turnaround technique for the model, whose gross sales have fallen for 4 straight quarters, by decreasing manufacturing and repair occasions and investing in shops to enhance buyer expertise.

“Our monetary outcomes do not but replicate our progress, however we now have actual momentum with our ‘Again to Starbucks’ plan,” Niccol stated in an announcement.

Starbucks paused rolling out its Siren System retailer revamp program, launched below former CEO Howard Schultz, as a result of it was capital heavy, stated Niccol, who had helped revive Chipotle Mexican Grill as CEO of the burrito chain.

The corporate will deal with investing in bettering front-end supply as an alternative of kitchen gear, Niccol stated on a post-earnings name. “The gear would not remedy the client expertise that we have to present.”

Niccol stated Starbucks was bettering service pace with the proper staffing and deployment, and that its refreshed advertising and marketing was resonating with prospects.

Starbucks may even overview its U.S. retailer portfolio because it rolls out labor-focused technological modifications together with a pilot program that permits prospects to schedule their cellular orders, he stated.

Nevertheless, shoppers are rising extra cautious as U.S. President Donald Trump’s erratic commerce tariffs have created financial uncertainty and threaten to gas inflation. U.S. restaurant visits and spending weakened in February and March.

Starbucks’ shares fell 6.5% in prolonged buying and selling. The inventory, which had surged within the months following Niccol’s appointment as CEO, is down about 7% up to now this 12 months.

North American same-store gross sales fell 1% for the fiscal second quarter ended March 30, worse than the 0.24% drop estimated by analysts in an LSEG ballot. The corporate stated gross sales in Canada returned to progress within the quarter.

TURNAROUND TIMELINE

It could take time for site visitors to reaccelerate as a result of modifications in shops and reinstating its espresso home roots might take at the very least one other three to 6 months, stated Bernstein analyst Danilo Gargiulo.

Starbucks is paring down promotions and reductions, and relying much less on its loyalty program because it invests in broader advertising and marketing.

The common ticket, or quantity spent by prospects per go to, was up 3% within the second quarter.

The corporate stated it’ll localize and transfer manufacturing as wanted to mitigate the affect of U.S. tariffs on imports from China.

The corporate’s worldwide enterprise improved barely, with gross sales unchanged in China, its second-largest market, after 4 straight quarters of decline. Starbucks stated it was dedicated to rising enterprise in China long-term.

Worldwide comparable gross sales rose 2%, in contrast with estimates of a 1.13% drop.

Gross margin fell 590 foundation factors within the quarter and the corporate reported adjusted earnings per share of 41 cents, lacking estimates of 49 cents.

Complete same-store gross sales declined 1% within the second quarter, in contrast with analysts’ common estimate of a 0.26% fall. Comparable gross sales had declined 4% within the previous three-month interval.

(Reporting by Juveria Tabassum in Bengaluru; Further reporting by Waylon Cunningham; Modifying by Sriraj Kalluvila and Richard Chang)

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