Starbucks posted disappointing sales growth in all its major regions on Thursday, signaling that it now has bigger problems than an overly saturated U.S. market.
Leslie Patton of Bloomberg News had the story:
The results from the quarter ending on Dec. 31 sent shares down as much as 5.8 percent in late trading in New York.
“Our holiday merchandise and limited-time offers did not perform up to expectations,” Chief Executive Officer Kevin Johnson said in an interview. In the U.S., the chain also saw “a little bit of softness in the afternoon, which may be a reflection of fewer people out shopping.”
While Starbucks expanded its holiday gift items this year to include tech gadgets and small games, sales of those products were weak, he said.
Starbucks also may be seeing more competition from fast-food chains that are heavily pushing value menus — McDonald’s Corp. recently began advertising cappuccino, mocha and macchiato coffees for just $2. And the java giant has fewer wide open spaces to expand into, now that coffee culture — and other chains — have spread to most of the world.
Sarah Whitten of CNBC.com reported that its holiday drinks failed to drive traffic:
Johnson attributed disappointing U.S. sales to weak sales of holiday beverages, merchandise and gift cards.
“Holiday [limited time offers] and merchandise did not resonate with out customers as planned,” he said on an earnings conference call Thursday. “To be more specific, in Q1, our food comp was 2 percent. Our core beverage comp, excluding holiday limited time offers was 1 percent. And together our holiday LTO and lobby items had a negative impact of over 1 point of comp.”
During the holidays, Starbucks had offered seasonal flavors such as an Eggnog Latte and Chestnut Praline Chai Tea Latte, among others.
Starbucks hopes to bolster sales in the U.S. by luring in customers in the afternoon with discounts and promotions. It also plans on continuing to leverage mobile ordering and digital marketing to increase the number of times consumers visit the coffee shop.
Kate Taylor of Business Insider reported that Starbucks hasn’t figured out a way to drive traffic to its stores:
The figures reveal that Starbucks still hasn’t figured out how to boost traffic. For more than a year, Starbucks’ primary sales drive has been customers paying more, as opposed to getting more visits from customers.
In December, Starbucks reported that global and American transactions were flat in fiscal 2017. The comparable sales growth of 3% in both categories was tied to a “change in ticket” — basically, by customers paying more per order because they bought more items or because items were more expensive.
Shares of Starbucks slumped as much as 4% after-hours on Thursday. The coffee giant said it earned an adjusted $0.65 per share — 14% above the expected $0.57 — on revenues of $6.073 billion. Analysts had expected $6.2 billion.
