Starbucks on Tuesday reported quarterly revenue that missed analysts’ expectations as both its U.S. and international locations saw weaker demand.
Despite the lack of revenue, the company’s shares rose more than 2% in after-hours trading.
Here are the financial data reported versus Wall Street expectations, based on a survey conducted by LSEG:
- Earning per share: 93 cents adjusted vs. 93 cents expected
- Income: $9.11 billion versus $9.24 billion expected
The coffee giant reported third-quarter net income of $1.05 billion, or 93 cents a share, down from $1.14 billion, or 99 cents a share, in the same period last year. Excluding certain items, Starbucks earned 93 cents a share.
Net sales decreased 1% to $9.11 billion. Same-store sales decreased 3% for the quarter, driven by a 5% decline in transactions.
Traffic to U.S. stores fell 6% this quarter. Domestic same-store sales fell 2%, mostly due to an increase in average transaction size. Last quarter, executives outlined plans to rejuvenate the struggling U.S. business, including offering discounts and introducing new beverages to lure customers back to the chain.
CEO Laxman Narasimhan said Tuesday that there are already signs of growth in the U.S. market, citing the success of new products. The Summer-Berry Refreshers drinks with boba-inspired pearls set a record for the best first-week product launch in the company’s history. The next quarter will also see the return of the popular Pumpkin Spice drinks, a staple since their introduction more than two decades ago.
Starbucks now lets customers order through its mobile app without having to join its loyalty program. Improvements to the app have also improved its accuracy in predicting when orders will be ready, reducing customer complaints. In a LinkedIn post following last quarter’s disappointing report, former CEO Howard Schultz stressed the need to improve the mobile app experience to win back customer loyalty.
Schultz isn’t the only investor concerned about Starbucks’ recent performance. Activist hedge fund Elliott Management has acquired a stake in the company. Narasimhan noted that the hedge fund is a Starbucks shareholder and described the ongoing discussions as constructive.
Internationally, same-store sales fell 7%. In China, Starbucks’ second-largest market, same-store sales fell 14%, with both average receipts and transactions down.
Starbucks faces increasing competition in China from local coffee shops offering lower prices. However, there are promising signs in the region. Average daily transactions and weekly sales in China have shown sequential improvement quarter over quarter, according to Narasimhan.
The company is in the “early stages” of exploring strategic partnerships to accelerate its growth in China, though the details of those partnerships remain unclear.
Starbucks opened a net 526 new stores during the fiscal quarter.
The company reiterated its previous quarterly outlook, expecting revenue growth in the low single digits and flat to low single digit earnings per share growth.