Starbucks is rolling out new store strategies and product innovations, including a cold foam protein drink, in an effort to turn around declining US sales. While the company says these initiatives are showing early promise, weak demand at home continues to weigh on overall performance.
In its fiscal third quarter, the coffee chain reported a 4 per cent rise in revenue to USD 9.5 billion, beating Wall Street’s forecast of USD 9.3 billion, according to FactSet.
However, same-store sales in the US fell 2 per cent, the sixth consecutive quarterly decline and a larger drop than analysts expected.
Although US customers are spending more per visit, transactions were down 4 per cent, signaling a decrease in foot traffic.
Meanwhile, China– Starbucks’ second-largest market — saw growth in same-store sales. CEO Laxman Narasimhan said the company is reviewing around 20 partnership offers as it looks to expand in smaller Chinese cities.
“We remain committed to our China business and want to retain a meaningful stake,” Narasimhan was quoted as saying by news agency AP.
“The intense interest in partnering with us is a testament to the great team, strong brand, and long-term opportunity for Starbucks in China. It really is a vote of confidence.”
HOW STARBUCKS PLANS TO REVIVE US SALES
To address US challenges, Starbucks will begin rolling out its new “Green Apron Service” model nationwide in mid-August. The system, tested in 1,500 stores, sets new staffing and hospitality standards to improve service during peak hours.
The company is also streamlining operations through new software that helps sequence orders, reducing wait times. Starbucks said 80 per cent of in-store orders are now fulfilled in under four minutes, meeting a target set last fall.
Still, those improvements come with significant costs. One major expense in the third quarter was a two-day leadership conference in Las Vegas, attended by 14,000 store managers and regional leaders.
Net income dropped 47 per cent to USD 558 million for the quarter. On an adjusted basis, earnings fell to 50 cents per share, below the analysts’ forecast of 65 cents.
Despite the earnings miss, Starbucks shares rose 3 per cent in after-hours trading, as investors showed cautious optimism about the company’s recovery efforts.
– Ends
With inputs from Associated Press
