The challenge of declining customer flow is intensifying, and the management is developing a plan to 'return to Starbucks'.
On October 22, local time, Starbucks (Nasdaq: SBUX) announced its preliminary results for the fourth quarter and full year of the 2024 fiscal year ending September 29, 2024. Net revenue for the fourth quarter decreased by 3% to $9.1 billion, global same store sales decreased by 7%, and GAAP earnings per share were $0.8, a year-on-year decrease of 25%.
According to the analysis, Starbucks' same store sales have declined for the third consecutive quarter. In the fourth quarter, Starbucks faced its largest decline since the outbreak of the pandemic.
Starbucks' fourth quarter performance was mainly affected by weak revenue in North America. Specifically, same store sales in the United States decreased by 6%, comparable transaction volume decreased by 10%, but this was partially offset by a 4% increase in average selling price. Same store sales in China decreased by 14%, average selling price decreased by 8%, and comparable transaction volume decreased by 6%.
For the full fiscal year 2024, Starbucks' net revenue increased by 1% to $36.2 billion, while global same store sales decreased by 2%. GAAP earnings per share were $3.31, a decrease of 8% from the previous year. Preliminary performance shows that the annual performance was lower than expected, mainly due to a significant decline in customer traffic, including a cautious consumption environment. Starbucks' targeted investments failed to improve customer behavior, including accelerating investment to expand product range, more frequent in app promotions, and integrated marketing. In addition, the intensified competition and weak macro environment in China have further put pressure on performance.
Due to the transition of the CEO and the current business situation, Starbucks announced that it will temporarily suspend the release of guidance for the fiscal year 2025. Starbucks points out that this will provide ample opportunities to evaluate the business and consolidate key strategies, while stabilizing and positioning the business for long-term growth.
In addition, while making strategic adjustments, Starbucks announced that its board of directors has approved an increase in quarterly cash dividend from $0.57 per share to $0.61 per share. Star Buck is confident in the company's long-term growth in terms of dividends and related growth.
Despite Starbucks' increased investment, we are unable to change the trajectory of declining foot traffic, which has put pressure on our revenue and profits, "said Rachel Ruggeri, CFO." We are developing plans to turn our business around, but this will take time. We hope to strengthen our confidence in the business and provide some certainty while driving it around. Therefore, we have increased our dividend
The fourth quarter performance clearly indicates that we need to fundamentally change our strategy in order to restore growth, and this is exactly what our 'Back to Starbucks' plan is doing, "said Brian Niccol, Chairman and CEO.
It is reported that Nicole took over the position of Chairman and CEO of Starbucks from Laxman Narasimhan on September 9th. The market is generally optimistic about Nicole's appointment, believing that her rich experience in food and beverage brand management can lead Starbucks to tackle a series of challenges. Previously, when Starbucks announced the change of leadership in August, its stock price surged 24.5% on the same day, setting a record for the largest single day increase in the company's history.
Regarding the "Return to Starbucks" plan, Nicole pointed out in a video released on the official website that returning to Starbucks means focusing on the unique brand characteristics that Starbucks has always had and becoming a warm coffee shop where people gather. "We have heard from some customers that we have deviated from the core and stopped communicating with them. The result is that some people have come back even less. In order to welcome all customers back and restore growth, we need to fundamentally change our strategy
I believe the problem is easy to solve, and Starbucks has a huge advantage, "Nicole said." I spend most of my time in the store talking to partners and customers, as well as meeting with the support center team. I have learned some experience and am using it to stabilize short-term business and develop future strategies. We have a clear plan and have taken quick action, no matter what challenges the consumer environment faces
Nicole said that Starbucks needs to provide customers with a good experience every time, especially during the morning rush hour. This commitment will drive Starbucks to address staffing issues in its stores and simplify processes for baristas, which also requires improvements in mobile ordering and payments. Nicole also stated that Starbucks must reposition itself as a community caf é, reintroduce itself to the world, fundamentally change its marketing approach, highlight handmade products that customers expect, showcase coffee innovation, simplify overly complex menus, fix pricing structures, and ensure that every customer feels value for money when visiting Starbucks.
Nicole publicly mentioned in September that Starbucks' recent focus is on the United States and the need to restore growth to its largest business. Of course, there are also many opportunities around the world, and the team will focus on how to restore growth for Starbucks in China and ensure that all international businesses perform well again.
It is reported that Starbucks currently has over 40000 stores worldwide, and as of the end of the third fiscal quarter, there were 7306 stores in China, accounting for over 18% of the total global stores.
Starbucks plans to release its actual financial results for the fourth quarter and full year of fiscal year 2024 after the close on October 30th, and hold a conference call at 2pm Pacific Time. Nicole also stated that she plans to share more measures and details about Starbucks' turnaround in business during the earnings conference call.
Due to the preliminary performance mentioned above, Starbucks' post market stock price fell by over 4%, and at one point fell by over 6%.