Starbucks CEO Laxman Narasimhan in a LinkedIn post said Starbucks operates from an unparalleled position of strength and the company has limitless opportunities ahead.
His post comes in the backdrop of the coffee chain’s quarterly earnings. Sales of Starbucks Corp fell for the first time since 2020 as the new lavender lattes and half-off deals were not enough to entice the budget-conscious consumers.
Its shares dropped as much as 13% in postmarket trading on April 30, Tuesday (local time). It it holds, this will be the biggest drop for the company since the early days of the COVID-19 pandemic in March 2020.
“There is no doubt that we are in the midst of a challenging economic environment and face headwinds across many of our key markets. However, we operate from an unparalleled position of strength thanks to our dedicated partners, our resilient and enduring brand, our leadership in coffee and our loyal customers,” Narasimhan said in a LinkedIn post.
On a call with investors Tuesday, the company cut its full-year revenue growth forecast to low single-digits and signaled adjusted earnings per share may be flat.
Starbucks has struggled to keep up with lofty expectations set by previous management. Narasimhan, who has been on the job a little more than a year, has already lowered guidance several times. But the latest results underscore the challenge of selling $6 lattes to consumers grappling with persistent inflation.
“With accelerated action, supported by our Triple Shot with Two Pumps strategic plan, we are confident in our long-term success. We have a great foundation which is anchored in coffee and our partner culture, and we have limitless opportunities ahead,” Narasimhan said in his LinkedIn post.
The company reported a 4% decline in same-store sales in the latest quarter, while analysts expected growth. In China, same-store sales fell 11%. The pullback by consumers was widespread, with the overall number of transactions sinking 6% and retreating in each of the company’s geographic segments. Consolidated net revenue fell, while earnings per share excluding some items also underperformed expectations.
Chief Financial Officer Rachel Ruggeri said the quarterly results were hurt by colder-than-usual weather in January that affected store visits across the industry, a more cautious consumer around the world and the conflict in the Middle East.
“We were not pleased with the performance this quarter,” Ruggeri said in an interview. “We really sharpened our focus, and we have a very clear path going forward.”
The chain is looking to reverse the slump by focusing on fulfilling demand in the mornings, Ruggeri said. Starbucks wants to boost product availability and cut wait times, including by updating how it makes some drinks. It’s working on new products to attract customers in the afternoons and launching a boba-like drink this summer.
Starbucks is also aiming to get more customers to try its app in hopes they’ll sign up for the loyalty program. Rewards members visit more often, according to executives.
With inputs from Bloomberg