Starbucks has decided to suspend its financial guidance for 2025 after experiencing a significant decline in sales. The company reported a 7% drop in same-store sales for the fourth quarter ended September 29, 2024, which was twice as steep as analysts had expected.
The decline was particularly pronounced in the US, where transactions were down 10%, and in China, where comparable sales fell 14%.
Financial guidance is a company's forecast or projection of its future financial performance. It typically includes estimates of revenue, earnings, expenses, and other key financial metrics for a specific period, such as a quarter or a fiscal year. Financial guidance helps investors, analysts, and stakeholders understand the company's expectations and make informed decisions.
When a company like Starbucks withdraws its financial guidance, it indicates uncertainty about future performance, which can affect investor confidence and stock prices.
For the fourth quarter of fiscal year 2024, global comparable store sales declined 7%, and consolidated net revenues declined 3% to $9.1 billion, or a 3% decline on a constant currency basis. GAAP earnings per share is $0.80, down 25% over prior year. Non-GAAP earnings per share is also $0.80, declining 24% on a constant currency basis.
The company’s results were primarily driven by softness in North America’s revenues in the quarter, specifically a 6% decline in U.S. comparable store sales, driven by a 10% decline in comparable transactions, partially offset by a 4% increase in average ticket.
Starbucks' New CEO Brian Niccol has acknowledged the need for a fundamental change in strategy to return to growth. He plans to simplify the menu, adjust prices, enhance mobile ordering, and revamp marketing efforts. Starbucks will also focus on making its cafes more inviting and improving morning service.
Fourth Quarter 2024:
- Global Comparable Store Sales: Declined by 7%
- Consolidated Net Revenues: Fell by 3% to $9.1 billion
- GAAP Earnings Per Share: $0.80, down 25% over the prior year.
- Non-GAAP Earnings Per Share: Also $0.80, declining 24% on a constant currency basis.
- US Sales: Declined by 6%, driven by a 10% drop in comparable transactions, partially offset by a 4% increase in average ticket.
- China Sales: Fell by 14%, with an 8% decline in average ticket and a 6% drop in comparable transactions.
Full Fiscal Year 2024:
- Global Comparable Store Sales: Declined by 2%.
- Consolidated Net Revenues: Increased by 1% to $36.2 billion.
- GAAP Earnings Per Share: $3.31, down 8% over the prior year.
- Non-GAAP Earnings Per Share: Also $3.31, declining 6% on a constant currency basis
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