Starbucks returns to growth on strong international sales
Starbucks Corp posted positive same-store sales growth for the first time in over a year, an early sign the coffee chain’s turnaround efforts are gaining traction.
Sales at established locations expanded by 1% in the company’s fiscal fourth quarter, Starbucks said Wednesday, ahead of the average estimate from analysts and breaking a string of six consecutive declines.
Same-store sales were powered by strength in international markets, which rose 3%. China sales rebounded, but performance was flat in the US, in line with expectations.
It’s an early success in CEO Brian Niccol’s bid to revitalise Starbucks. He’s had to contend with consumers pulling back on coffee amid higher prices across the economy. His programme, dubbed “Back to Starbucks,” aims to make coffeehouses more welcoming and improve customer service.
Starbucks shares erased earlier gains during the company’s conference call and were little changed in New York. The stock has slumped 7.8% this year, worse than the 17% gain for the S&P 500 Index over the same period.
Investors are concerned about the cost of the improvements, as well as their slow pace of implementation.
Starbucks said its operating margin contracted in the latest quarter, citing costs associated with closed locations and corporate layoffs, as well as inflation and investment in the company’s turnaround plan. Most of that investment was in the form of labour hours.
Additionally, the company has only renovated 70 locations so far, mostly in New York and Southern California. That pace is expected to accelerate, with more than 1,000 expected to be completed at the end of the current fiscal year, which runs through next September.
“It’s a small sample size, but we are encouraged by the improvements to sales and transactions we’ve seen to date,” Niccol said during the company’s conference call.
Net revenue of US$9.6 billion also surpassed analyst estimates in the quarter, which ended Sept 28, while earnings per share fell short.
Starbucks is paring down its menu and replacing unpopular beverages with options more matched to consumer tastes. The company closed 627 locations, over 90% of which were in the US, according to the statement. Including new locations, store count was down 107 overall in the period.
Starbucks didn’t offer guidance. The company plans to offer an outlook for both fiscal 2026 and longer term during an investor day scheduled for late January.
