Starbucks Serves Up a Cold Q4. Is the Turnaround Still Alive?

Starbucks Corporation (NASDAQ: SBUX) recently reported its preliminary financial results for the fiscal fourth quarter and full fiscal year ended September 29, 2024, revealing a challenging quarter and a need for a strategic reset. The coffee giant's global comparable store sales declined 7%, and consolidated net revenues fell 3% to $9.1 billion. GAAP earnings per share dropped 25% to $0.80, while non-GAAP earnings per share declined 24% on a constant currency basis.


The company's performance was primarily driven by softness in North America, with a 6% decline in U.S. comparable store sales. This was due to a 10% decline in comparable transactions, partially offset by a 4% increase in average ticket. Starbucks' accelerated investments in an expanded range of product offerings, along with more frequent in-app promotions and integrated marketing, failed to improve customer behaviors and traffic across both Starbucks Rewards and non-SR customer segments.


In China, comparable store sales declined 14%, driven by an 8% decline in average ticket and a 6% decline in comparable transactions. The competitive environment and a soft macroeconomic environment in China pressured the company's results further.

The company's CEO transition, coupled with the current state of the business, led to the suspension of fiscal 2025 guidance. This move will allow ample opportunity to complete an assessment of the business and solidify key strategies, while stabilizing and positioning the business for long-term growth.

Brian Niccol, Starbucks' chairman and chief executive officer, acknowledged the need for a fundamental change in strategy to get back to growth. He plans to implement the 'Back to Starbucks' plan, which includes focusing on what has always set Starbucks apart: a welcoming coffeehouse where people gather and where the finest coffee is handcrafted by skilled baristas. Niccol also emphasized the importance of supporting baristas with the time and tools they need to provide exceptional customer service.


In conclusion, Starbucks' Q4 results reflect a challenging quarter, with a decline in comparable store sales and revenues. The company's marketing strategies and investments failed to improve customer behaviors and traffic, while the competitive environment and macroeconomic factors in China contributed to the poor performance. The CEO transition and suspension of fiscal 2025 guidance have impacted investor confidence in the turnaround plan. Brian Niccol's 'Back to Starbucks' strategy aims to address the company's challenges and restore growth.