Dismal results in China- Starbucks won’t release financial forecast for now

Starbucks has recently released preliminary financial results that reveal a staggering sales decline for the past quarter, far exceeding market expectations. According to the report, the company’s same-store sales dropped by 7% for the fourth quarter of fiscal year 2024. Alarmingly, the decline is twice as steep as analysts had predicted and marks the largest quarterly decrease in four years.

The situation is particularly dire in the U.S. market, where same-store sales fell by 10%, while the Chinese market experienced an even sharper downturn of 14%. In light of these troubling results, Starbucks has opted to delay the release of its financial guidance for the fiscal year 2025, allowing new CEO Brian Niccol time to evaluate operations and strategize for a turnaround.

Since taking the helm on September 9, Niccol has made significant leadership adjustments and laid out plans aimed at stimulating growth. These include enhancing the attractiveness of its coffee shops and improving morning service. However, Edward Jones analyst Brian Yarbrough suggests that the turnaround may take longer than some investors anticipate, warning that the upcoming quarters could be quite challenging.

In response to the disappointing initial earnings report, Starbucks’ stock plunged by as much as 9% in after-hours trading before recovering slightly. Year-to-date, the stock has gained less than 1%, a stark contrast to the S&P 500’s 23% increase during the same period. The full financial results for the last quarter are set to be released on October 30.

In a video posted on Starbucks’ website, Niccol emphasized the need for a fundamental shift in the company’s recent strategies to restore growth. He mentioned plans to simplify the “overly complicated” menu and evaluate pricing, as well as to improve marketing approaches—focusing on their handcrafted products and addressing staffing challenges.

Bloomberg noted that it is not uncommon for newly appointed leaders like Niccol to hold off on guidance in order to reset investor expectations and prepare for a fresh start. Similarly, Nike recently retracted its sales guidance ahead of new CEO Elliott Hill’s arrival, as the company confronts some of its most significant operational challenges in decades.