Starbucks on Wednesday posted its first quarter of global comparable sales growth in nearly a year and a half, driven by international markets, although growth still eluded its U.S. operation, which is being overhauled by Chief Executive Brian Niccol.
However, the company fell short of profit expectations, and margins fell sharply due to a combination of rising coffee bean prices, tariffs on imported products, and the company’s investment costs.
The results follow several quarters of declining sales that prompted the August 2024 hiring of Niccol, who undertook a brand reboot known as “Back to Starbucks.” Since taking over, Niccol has closed hundreds of stores, simplified the menu and made efforts to speed up service.
Global comparable sales rose 1%, but in the United States, its largest market, comparable sales were flat and average spending per customer fell.
“Recoveries are difficult to forecast, and while we have good reason to believe that our comparable company-operated sales in the U.S. should improve throughout the year, we know that recoveries are not linear,” Chief Financial Officer Cathy Smith said in a post-earnings call.
Starbucks shares fell 0.8% in after-hours trading. They have fallen about 7% so far this year.
Starbucks’ fourth-quarter earnings were 52 cents per share, missing estimates of 56 cents, according to LSEG data.
You may like:
Apple prepares for increased iPhone sales due to strong demand for the Pro
Tariff-induced blow
While Starbucks is protecting itself against a rise in coffee prices, the commodity has faced supply issues due to geopolitical volatility, including 50% tariffs imposed by US President Donald Trump on top producer Brazil, and climate concerns. Global raw Arabica bean prices have risen more than 20% this year after soaring 70% in 2024.
The company expanded its restructuring efforts in September to close underperforming stores, including its flagship unionized roastery in Seattle. It said Friday that it had closed 627 stores in the fourth quarter as part of that plan.
Chief Financial Officer Smith said the company hopes to provide a financial outlook at an investor event in January. Starbucks suspended its guidance shortly after Niccol took over.
Starbucks is also at an impasse with the union that represents baristas at about 550 stores in the United States, with negotiations reaching an impasse last year, and the union plans to vote this week on whether to authorize a strike over unfair labor practices.
In China, Starbucks’ second-largest market outside the United States, the company reported a 2% increase in comparable sales, after a return to growth in that metric last quarter.
Starbucks has lowered prices on non-coffee products in China and has tried to offer more customization options and local flavors.
The company is close to selling a majority stake in its business in China as its market share has declined in recent years due to strong competition from local coffee chains offering cheaper products amid an economic slowdown that has changed consumer habits.
With information from Reuters.
Follow business information in our specialized section
