Starbucks Q2CY2024 earnings report: Sales tumble but shares pop
In Q2CY2024, Starbucks (NASDAQ: SBUX) reported a mixed performance, with revenue remaining flat at $9.11 billion, falling short of analyst expectations by 1.5%.
Despite the disappointing revenue figure, the company managed to post a slight beat on operating income, with $1.52 billion compared to estimates of $1.51 billion. Non-GAAP earnings per share (EPS) were in line with expectations at $0.93.
One area of concern was the decline in gross margin to 27.9% from 28.4% year-on-year, reflecting the company's ongoing efforts to improve operational efficiency.
However, free cash flow improved dramatically, rising from a negative $153.1 million in the previous quarter to $2.58 billion, showcasing a positive financial trend.
Starbucks' global footprint expanded with 2,255 new locations, bringing the total count to 39,477 at the end of the quarter. This expansion highlights the company's commitment to growth.
Despite a 3% year-on-year decline in same-store sales, a reversal from the 10% increase in the prior year, the company attributes its financial performance to its ongoing "three-part action plan" aimed at driving operational improvements.
CEO Laxman Narasimhan emphasized the company's progress, stating that these improvements are expected to positively impact financial performance in the long run.
Analysts are cautiously optimistic, with Wall Street projecting a 7% sales growth over the next 12 months, which would be an improvement from the Q2CY2024 results.
The slight miss on same-store sales and revenue, coupled with the mixed financials, has left investors wondering about the potential for a turnaround. Investors will be closely watching the earnings call, where the company is expected to provide guidance that could potentially influence the stock price.
While Starbucks' Q2CY2024 earnings report was marked by a revenue miss, the improved cash flow and operational efficiency indicate that the company is making strides in executing its strategic plan.
The upcoming guidance and the possibility of a return to positive same-store sales growth could make it an interesting time to consider the stock for those with a long-term investment horizon. However, the stock's immediate reaction, a 1.3% increase to $76.93, suggests that the market is tempering expectations for now.