Starbucks Shares Plummet Amid Weak US Demand in Q4 Preliminary Results

Starbucks Corporation (NASDAQ: SBUX) shares dropped sharply after the company reported preliminary fourth-quarter results, reflecting a significant decline in US demand. The coffee giant's stock fell by approximately 4% in after-hours trading, despite a nearly 28% gain since the appointment of new CEO Brian Niccol in early August.

The preliminary results indicated a 6% decline in US comparable store sales, driven by a 10% drop in comparable transactions, partially offset by a 4% increase in average ticket. The company's overall global comparable store sales declined by 7%, with consolidated net revenues falling by 3% to $9.1 billion. GAAP earnings per share decreased by 25% over the prior year, while non-GAAP earnings per share declined by 24% on a constant currency basis.

The company attributed the weak US demand to several factors, including a cautious consumer environment, increased competition, and a decline in customer traffic. Despite accelerated investments in an expanded range of product offerings, more frequent in-app promotions, and integrated marketing efforts, Starbucks was unable to improve customer behaviors and traffic across both Starbucks Rewards and non-SR customer segments.

Starbucks' China operations also faced challenges, with comparable store sales declining by 14% due to intensified competition and a soft macro environment that impacted consumer spending. The company's full fiscal year 2024 results showed a 2% decline in global comparable store sales and a 1% increase in consolidated net revenues to $36.2 billion.

In response to the weak demand and declining sales, Starbucks suspended its financial guidance for the full fiscal year 2025. The company is developing a plan to turn around its business, focusing on simplifying its overly complex menu and fixing its pricing architecture. CEO Brian Niccol has also announced a strategic reset, aiming to get back to growth with the 'Back to Starbucks' plan.

As the company works to address its challenges, it has increased its quarterly cash dividend from $0.57 to $0.61 per share of outstanding common stock, demonstrating its confidence in the long-term growth prospects. Starbucks will provide more insights into its turnaround plan during the Q4 and full fiscal year 2024 earnings call, scheduled for October 30.

In conclusion, Starbucks' preliminary Q4 results highlighted the challenges the company faces in the US market, with weak demand and declining sales impacting its overall performance. As the company works to implement its 'Back to Starbucks' plan and address these issues, investors will be closely watching to see if Starbucks can successfully navigate the competitive landscape and return to growth.