Starbucks Admits It Is Struggling & Losing Customers in 2024
Starbucks continues to reign as one of the world's largest and most profitable restaurant chains. But despite holding that highly-coveted title, the coffee giant is facing its fair share of financial struggles in 2024.
The company just released its latest quarterly earnings results, reporting customer traffic declines, a 4% drop in global same-store sales, and a 6% decline in global transactions. In North America specifically, same-store sales and transactions declined by 3% and 7%, respectively.
This is Starbucks' first negative financial performance since 2020, when its shops temporarily stopped offering dine-in service amid the pandemic, Restaurant Business Magazine reported. The chain's stock fell 12% in after-hours trading following the release of its earnings results on April 30.
According to Starbucks executives, several reasons contributed to its unusually iffy quarter. CEO Laxman Narasimhan said during an earnings call that budget-conscious consumers have been more careful about their spending, which has taken a toll on guest traffic. Severe weather in the United States at the start of the year also negatively impacted sales as more consumers stayed home.
"Our performance this quarter was disappointing and did not meet our expectations," Narasimhan said.
Troubles in some of Starbucks' international markets have only added to its financial woes. Starbucks is facing fierce competition from rival "value" chains in China, where same-store sales dropped 11% last quarter, according to Narasimhan.
He added that Starbucks is seeing "economic volatility" in the Middle East, where the Israeli-Palestinian conflict is ongoing. Additionally, many customers have boycotted Starbucks since late 2023 after the company sued the Workers United union for trademark infringement over a now-deleted social media post expressing solidarity with Palestine.
Some people mistakenly believed that Starbucks itself was behind the post because the union uses "Starbucks" in its name and a similar logo, the coffee chain said in an October statement. Starbucks called the post "reckless and reprehensible" and condemned violence in the region, but the union has since countersued.
Looking ahead, the company hopes to encourage customers to start visiting more by launching exciting new menu items and adding new in-app value offers. Starbucks also plans on investing more in its supply chain to ensure it can meet demand for popular foods and beverages.
"[The quarter] did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us," Narasimhan said in a statement. "We have a clear plan to execute and the entire organization is mobilized around it."
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