Starbucks (SBUX, Financial) has temporarily delayed issuing its fiscal 2025 guidance following a third straight quarter of declining sales, raising concerns about the ability of newly appointed CEO Brian Niccol to tackle multiple pressing issues.
According to preliminary earnings reports, same-store sales fell 7% in the fourth quarter ending September 29. In the U.S., same-store sales dropped 10% year-over-year, while in China, they decreased by 14%. Starbucks stated that halting the current fiscal year's guidance gives Niccol an opportunity to assess the business and refine plans to reverse the downturn.
Since taking office on September 9, Niccol has restructured the leadership team and outlined a growth stimulation plan, including enhancing the appeal of coffee shops and speeding up morning service. Some analysts, like Brian Yarbrough from Edward Jones, believe that the turnaround could take longer than some investors expect, suggesting that the next few quarters will be challenging.
This sales decline is double what analysts previously anticipated and marks the largest quarterly drop in four years for Starbucks. Efforts to introduce new products and offer extensive promotions failed to attract more customers.
Starbucks shares fell 9.1% in after-hours trading, later narrowing the loss. The stock has risen less than 1% this year, whereas the S&P 500 has gained 23% over the same period.
In a video posted on Starbucks' website, Niccol stated the need for a fundamental strategic shift to regain growth momentum. He emphasized the importance of simplifying the "overly complex" menu, evaluating pricing strategies, and improving marketing methods to highlight handcrafted products.
