In This Article:
Key Points
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Starbucks saw sales inch higher in its fiscal second quarter, but substantial cost increases caused an even larger drop in earnings than most had projected.
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CEO Brian Niccol tried to maintain investor confidence in the Back to Starbucks strategic plan despite worries about macroeconomic pressures.
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Most investors aren't expecting a big uptick in growth until fiscal 2026.
Here's our initial take on Starbucks' (NASDAQ: SBUX) fiscal second-quarter financial report.
Key Metrics
| Metric | Q2 FY 2024 | Q2 FY 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Total revenue | $8.56 billion | $8.76 billion | +2% | Missed |
| Adjusted earnings per share | $0.68 | $0.41 | -40% | Missed |
| North America comparable sales | -3% | -1% | +2 pp | n/a |
| International comparable sales | -6% | +2% | +8 pp | n/a |
Grinding Through a Turnaround
Starbucks' fiscal second-quarter report for the period ended March 30 didn't give investors everything they had hoped to see. Overall revenue gains of 2.3% fell about $70 million short of the consensus forecast among those following the coffee chain. Similarly, the 40% plunge in adjusted earnings was fully $0.07 per share worse than most had anticipated.
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A look beyond the headline numbers showed other concerns. Global comparable sales were down 1%, as a 2% drop in the number of transactions outweighed a 1% rise in the average consumer's ticket. The 4% drop in North American transaction counts led to a similar 1% fall in North American comps. International comps were a bright spot, rising 2% on a 3% rise in transaction counts, but China's comps were flat.
One big problem that Starbucks struggled through was a 12% rise in store operating expenses, which was a key contributor in sending operating expenses up 9% year over year. The coffee chain operator blamed restructuring costs and expenses related to the Back to Starbucks initiative, which involved the reduction of 1,100 workers along with the elimination of several hundred open and unfilled positions within the company.
Immediate Market Reaction
Starbucks investors seemed prepared for the less-than-stellar news. Shares initially dropped as much as 2%, but by the end of the first half-hour of after-hours trading following its release of quarterly results, shares had clawed back their losses and were close to unchanged.
Some of that muted response might well have stemmed from the fact that shares had fallen more than 25% since the end of February. A combination of tariff concerns and broader macroeconomic worries contributed to the weakness.