Starbucks Earnings Mask Grim Reality Of Plummeting Traffic, Proving Turnaround Strategy a Pipe Dream

Starbucks just dropped its earnings report for the quarter, and while the headline numbers might have passed the Wall Street sniff test, the story underneath is a little uglier. Sure, they beat expectations—69 cents per share versus the 67 cents analysts were looking for, and $9.4 billion in revenue came in ahead of the $9.31 billion target. However, same-store sales, the metric that actually tells you if anyone’s still showing up for overpriced coffee and vibes, fell for the fourth straight quarter. Traffic to U.S. stores? Down 8%. You can slap lipstick on this pig all you want, but it’s clear Starbucks is struggling to get butts in seats.

(Source: Giphy) 

In short, CEO Brian Niccol, the guy best known for turning Taco Bell into a millennial meme machine, is trying to play the savior card with his “back to Starbucks” strategy. Spoiler: it’s not working (yet). The turnaround playbook includes cutting 30% of the menu by 2025 (RIP olive oil drinks, we hardly knew ye), tweaking store operations, and pretending that customers care about not being charged extra for oat milk. Niccol says these moves have generated a “positive response,” but let’s be real—if the response was actually positive, we wouldn’t be seeing a 4% drop in same-store sales.

Breaking it down further, U.S. same-store sales fell 4%, with an 8% traffic decline offset by slightly higher ticket sizes. Translation: fewer people are coming in, but those who do are either splurging on ventis or grabbing an extra cake pop out of sheer guilt. Internationally, the picture doesn’t look much better. Same-store sales outside the U.S. also fell 4%, and in China—Starbucks’ second-largest market—the decline was 6%. Turns out, competing with dirt-cheap rivals like Luckin Coffee isn’t as easy as slapping a green logo on everything and calling it a day.

(Source: CNBC) 

Meanwhile, Starbucks is also pulling back on its ambitious growth plans. Niccol announced plans to slow down new store openings and renovations in 2025 to free up cash for this so-called turnaround. But don’t worry, they’re still talking about eventually doubling their U.S. store count. How? By closing underperforming locations and calling it “portfolio optimization.” Of course, whether this move works or not, remains to be seen. 

But, but, but… the real highlight of the earnings release, is that Niccol & Co. are still clinging on suspending their fiscal 2025 forecast while also walking back a $4 billion supply-chain savings target set by Niccols predecessor. So not only is the coffee giant struggling with declining traffic, but it’s also failing to deliver on cost-cutting promises made just a year ago.

(Source: CNN) 

The takeaway here? Starbucks beat the earnings estimates, but the same-store sales decline—and the broader trend of fewer customers walking through the door—paints a much different picture. And it ain’t a good one. Niccol has been at the helm for three months now, and so far—it seems like his comments and plans are beginning to mimic those of a tinkling brass cymbal. 

Meaning, the market may be willing to give Starbucks a pass for now, but if these trends continue, it won’t be long before Wall Street loses its patience and starts yeeting shares. So yeah, the pressure here to actually do something meaningful instead of slashing prices like they’re trying to see how much they can piss people off before someone opens a Dunkin’ next door is real AF. 

(Source: Giphy) 

For now, keep an eye on Starbucks and place your bets accordingly. And as always, stay safe and stay frosty, friends! Until next time… 

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Stocks.News holds positions in Starbucks as mentioned in the article.