Starbucks (SBUX, Financial) recently revealed its preliminary financial results for the fourth quarter and full year ending September 29, 2024. The company reported a 3% decline in net revenue for the fourth quarter, amounting to $9.1 billion, while global same-store sales dropped by 7%. GAAP earnings per share fell by 25% to $0.8. This marks the third consecutive quarter of declining same-store sales, with the fourth quarter experiencing the largest drop since the pandemic began.
The weak performance was largely due to slumping revenues in North America. In the U.S., same-store sales fell by 6% and comparable transaction volume decreased by 10%, though a 4% increase in average ticket prices partially offset these declines. In China, same-store sales were down 14%, with a drop in both average prices and transaction volumes.
For the entire fiscal year 2024, Starbucks saw a 1% growth in net revenue, reaching $36.2 billion, while global same-store sales decreased by 2%. GAAP earnings per share dropped by 8% to $3.31. The overall performance fell short of expectations, primarily due to a noticeable decline in customer traffic amidst a cautious consumption environment. Targeted investments to improve customer behavior, such as product range expansion and marketing promotions, have not yielded the anticipated results. Furthermore, intensified competition and a sluggish macroeconomic environment in China exacerbated the pressure on Starbucks' performance.
Amid the CEO transition and current business conditions, Starbucks announced it will pause guidance for fiscal year 2025. This decision is intended to allow sufficient time for a comprehensive business evaluation and to solidify key strategies for long-term growth.
Despite these challenges, Starbucks' board approved an increase in the quarterly cash dividend from $0.57 to $0.61 per share, signaling confidence in long-term growth potential. CFO Rachel Ruggeri acknowledged the difficulties in reversing the decline in customer traffic, which has strained revenue and profits, and expressed the necessity for time in executing their recovery plan.
The new Chairman and CEO, Brian Niccol, emphasized the need for a fundamental strategic overhaul for growth, as outlined in their "Back to Starbucks" initiative. This involves regaining focus on Starbucks' core brand identity as a welcoming hub. Niccol highlighted customer feedback indicating a drift from core values and the need to reconnect with their audience to revive growth.
Niccol mentioned the importance of enhancing customer experience, particularly during peak times, by addressing staffing issues, streamlining processes, and improving mobile ordering. The strategy includes repositioning Starbucks as a community coffeehouse, simplifying the menu, fixing pricing structures, and ensuring value for customers.
Starbucks operates over 40,000 stores globally, with China accounting for more than 18% of these locations. Niccol has pointed out the necessity to rejuvenate growth in the U.S. and seize opportunities for improvement in China and other international markets.
Starbucks plans to release its full fiscal year 2024 financial results on October 30, following market close, and will hold a conference call to discuss additional measures to improve its business.
