It has been about a month since the last earnings report for Starbucks (SBUX). Shares have added about 3.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Starbucks due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Starbucks' Q4 Earnings Meet Estimate, Revenues Lag, Comps Decline

Starbucks reported fourth-quarter fiscal 2024 results, with earnings meeting the Zacks Consensus Estimate but revenues missing the same.

Discussion on Earnings, Revenues & Comps of SBUX

In the fiscal fourth quarter, the company reported adjusted earnings per share (EPS) of 80 cents, in line with the Zacks Consensus Estimate. The bottom line decreased 24.5% year over year from adjusted EPS of $1.06 reported in the prior-year quarter.

Quarterly revenues of $9,074 million missed the Zacks Consensus Estimate of $9,097 million. However, the top line declined 3.2% on a year-over-year basis, due to dismal North America and U.S. comparable store sales.

Global comparable store sales declined 7% year over year. The downside was backed by a decrease of 8% in comparable transactions, partially overshadowed by a 2% increase in average tickets. In the fiscal fourth quarter, Starbucks opened 722 net new stores worldwide, bringing the total store count to 40,199.

Overall Margin Contracts in SBUX’s Q4

On a non-GAAP basis, the operating margin was 14.4%, contracted 380 basis points (bps) from the prior-year. The decline was mainly due to deleveraging, investments in wages and benefits for store partners and heightened promotional activities. However, this contraction was partially mitigated by price increases and improved in-store operational efficiencies.

SBUX’s Segmental Details

Starbucks has three reportable operating segments—North America, International and Channel Development.

North America: In the fiscal fourth quarter, segmental net revenues were $6.69 billion, down 3% year over year. The segment’s comparable store sales declined 6% against 8% growth in the prior-year quarter. Average transactions declined 10%, whereas change in tickets rose 4% year over year. Operating margin was 18.7% compared with 23.2% in the prior-year quarter. The negative impact stemmed from a combination of deleverage, additional investments in store partner compensation and benefits and heightened promotional efforts.

International: Segmental net revenues of $1.89 billion declined 4% year over year. The segment’s comparable store sales declined 9% year over year, owing to 4% and 5% decline in transactions and tickets, respectively. Operating margin contracted 30 bps year over year to 14.9%. The downside was due to investments in store partner wages, benefits and promotional activities and strategic investments. However, this contraction was partially mitigated by improved in-store operational efficiencies. In the fiscal fourth quarter, comps in China dropped 14% against growth of 5% in the prior-year quarter. A 6% decline in transactions and 8% decrease in tickets hurt the company’s performance in China.

Channel Development: Net revenues in the segment fell 4% year over year to $465.4 million. The dismal performance was due to a decline in revenues in the Global Coffee Alliance from SKU optimization. In the quarter, the segment’s operating margin expanded 110 bps year over year to 56.9%. The increase was driven by a shift in sales mix and reduced product costs associated with the Global Coffee Alliance. This growth was somewhat offset by higher costs impacting income from its North America’s Coffee Partnership joint venture.