Starbucks Stock Drops 9% as Earnings Miss Expectations

Starbucks' stock price plummeted by over 9% in early trading on Wednesday, following the release of its second-quarter earnings report, which fell short of Wall Street's expectations. This disappointing performance has cast a shadow over the company's efforts to turn around its fortunes under the leadership of its new CEO, Brian Niccol.

The company's same-store sales, a closely watched metric that covers the performance of stores open for more than a year, declined for the fifth consecutive quarter, dropping by 2%. This decline was attributed to consumers shifting towards competitors like Dunkin' and McDonald's in search of more affordable options. Analysts had previously predicted a more modest decline of 0.3% for this metric.

The decrease in Starbucks' store sales was driven by a reduction in the number of customers purchasing beverages in-store. However, those who continued to frequent Starbucks' locations spent more per visit. Compared to the same period last year, the number of transactions decreased by 4%, while the average ticket size in the U.S. region increased by 3%.

In the increasingly competitive China market, Starbucks has experienced a decline in same-store sales for four consecutive quarters. Investors have been closely monitoring the company's performance in this region.

In China, while the number of customers visiting Starbucks increased, their spending per visit decreased. Starbucks' same-store sales in China for the second quarter of its 2025 fiscal year remained flat, as a 4% increase in transaction volume was offset by a 4% decrease in average ticket size. Analysts had previously expected a decline of over 2% in same-store sales for China.

Other key metrics were also disappointing. For the quarter ending March 30, the coffee chain reported adjusted earnings per share of $0.41, below the $0.49 expected by Wall Street analysts. Its revenue of $8.76 billion also fell short of the $8.83 billion forecast.

Starbucks' adjusted operating margin, which represents the proportion of revenue remaining after operating expenses, was 8.2%, below the 9.5% expected by analysts. In the quarter ending in March, the coffee chain's profit fell by more than 50% year-over-year to $384 million.

CEO Brian Niccol acknowledged the disappointing results, stating, "Our second-quarter performance was disappointing." However, he added, "Behind the scenes, we have made significant progress, and our 'Return to Starbucks' plan is gaining real momentum."

Niccol expressed confidence in the 'Return to Starbucks' plan, stating, "I have moved from being optimistic to being confident that our 'Return to Starbucks' plan is the right strategy to turn around our business and unlock future opportunities."

Last fall, Niccol joined Starbucks from Chipotle, a Mexican fast-casual chain, with a lucrative compensation package and controversial benefits. Given the coffee giant's underperformance in both domestic and international markets, Niccol launched a plan to turn around Starbucks' business.

His plan includes accelerating service speeds, streamlining Starbucks' menu to focus on core coffee products, and winning back customers in the highly competitive China market.

In January, Starbucks exceeded Wall Street's relatively low expectations for its first-quarter earnings results for the 2025 fiscal year. However, the company reported a 4% decline in same-store sales during this period, driven by a 6% decrease in customer traffic and a 3% increase in average ticket size.

In the first quarter, Starbucks' same-store sales in China declined by 6%, an improvement from the 14% decline seen in the previous two quarters.

Despite these challenges, Niccol remains optimistic about the business opportunities in China. He told analysts, "I want to be clear that we remain committed to the China market in the long term. We see tremendous potential for our business there in the coming years and are open to how we can achieve growth."

Niccol's team is working to create a "momentum" in the China market through "product innovation" and "more marketing activities."

As part of Niccol's turnaround plan, Starbucks laid off over 1,000 employees in February and ended its policy of allowing non-customers to enter its stores.

In ongoing negotiations last week, Starbucks' unionized workers rejected the company's latest contract offer. Employees at a Starbucks location in Buffalo first voted to form a union in 2021.