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Coffee chain Starbucks (SBUX) released its fiscal second quarter earnings results after Tuesday's market close, posting adjusted earnings of $0.41 per share and net revenue totaling $8.76 billion. These figures came out just below EPS estimates of $0.49 EPS and revenue forecasts of $8.83 billion.
Market Domination Overtime's Julie Hyman and Josh Lipton examine Starbucks' latest earnings figures and slightly larger-than-expected declines in comparable store sales.
To watch more expert insights and analysis on the latest market action, check out more Market Domination Overtime here.
Let's get to Starbucks, that company reporting second quarter comp sales, missing analyst estimates largely because of weakness in North America, and in the US, specifically, comp sales fell by 2%. That is a bigger drop than analysts had anticipated. I believe this is the fifth consecutive quarter of declines in comps, overall, uh, second quarter comp sales overall for the company down 1%. Interestingly, one bright spot, or at least on a relative basis, was China. Comparable sales there were flat. Analysts had been looking for a drop of more than 2%. So that's an interesting detail here. It looks like adjusted earnings per share missing estimates by eight cents, coming in at 41 cents. What's interesting is the tone in the statement, at least, is still relatively positive. Brian Nichol, uh, the CEO of the company, he says, "My optimism has turned into confidence that our back to Starbucks plan is the right strategy to turn the business around and to unlock opportunities ahead." There's been some reporting about some technological changes and throughput changes that the companies made to try to get drinks and other products in the hands of customers faster. Um, so perhaps that's one of the things that he is referring to there. Uh, but Josh, we're seeing a quick, uh, little bit of a downdraft in the shares here.
Yeah, heading into this when your stock was down about 10% this year, it's down about 5% over the past 12 months, and we're kind of bouncing here in the after-hours down about 2% right now. China does get a lot, a lot of attention, a lot of headlines because there's a lot of cross currents there, macro pressure, competitive pressure, of course, throwing out trade war. I know analysts bring up the risk of US brand boycotts, but it is interesting that that they would come in flat like that. Um, more commentary from the CFO as well saying, well, our financial results are far from Starbucks' potential. Uh, Kathy Smith says, we are working to build back a better business. She goes on to say, we are developing new muscles to test, iterate, and scale quickly.
Yeah, the only mention of tariffs in this statement, I'm sure I'll get mentioned on the call. The only mention of the statement is in the sort of disclaimers and disclosures at the end, risk factors for the company. So, we'll see what they say in terms of tariff effects on coffee itself, for example, raw materials, um, and also the whole issue of consumer confidence in this environment.