Weak Earnings Report Prompts Starbucks to Scramble for Change
Starbucks is suffering from a mixed quarterly report that has the company trying to make changes to compensate.
Quick overview
- Starbucks reported an increase in revenue but a decrease in net income and earnings per share in its latest quarterly earnings report.
- The company's stock has been volatile, fluctuating between $90 and $95.90 per share following the underwhelming earnings results.
- Management is implementing changes to address declining in-store sales, including reducing wait times and modifying the menu.
- Despite a strong shareholder return over the past five years, Starbucks faces significant competition and investor uncertainty due to recent sales figures.
This week, Starbucks (SBUX) issued its quarterly earnings report and showed that while revenue was up, net income and earnings per share had both decreased.
Starbucks stock has been moving wildly today in response to an underwhelming earnings report, with the stock fluctuating between $90 and $95.90 per share over the space of a few hours. The company’s third quarterly report recognized a drop in net income even though the company’s stock has gained 16% in that time.
This puts investors in a tough spot. Do they jump ship after a report shows that the company has been experiencing declining in-store sales across the globe (down 2% compared to the previous year)? Or do they buy in before a potential surge after the company has shown strong stock growth this last quarter?
Starbucks Makes Changes
Starbucks management has seen the year-over-year decline of in-store sales happening, and they have already been working to make some changes to the way they do business. They have been working to decrease wait times on orders, change up the menu, and add seating back into stores that have lost seats.
The company is also discussing a potential sale to China of all its operations there, which would be a major shift for the company in that market. The company has struggled to keep its sales record positive there, adding a number of teas to the menu and shifting to meet cultural expectations.
Board changes have been taking place at Starbucks, which may have helped the company keep its stock growth steady, but this week’s sales figures are disappointing to investors. Unless the company can turn things around this quarter, their promises of change may fall flat with investors.
Starbucks did earn more revenue this quarter compared to last quarter, but their net income is down, which paints a confused picture for investors and makes them less of an appealing investment choice for those who are considering the coffee company. Starbucks has proven its resilience with a shareholder return of more than 37% over the last five years, but they are also facing mountain competition in most markets.
- Check out our free forex signals
- Follow the top economic events on FX Leaders economic calendar
- Trade better, discover more Forex Trading Strategies
- Open a FREE Trading Account
Save