- Starbucks is bracing for its seventh consecutive quarter of same-store sales declines, with Wall Street projecting a 0.3% drop.
- Investor anxiety is growing as the company’s stock has fallen 7% this year, starkly underperforming the S&P 500’s 17% climb.
- The coffee giant’s turnaround efforts include a massive $1 billion restructuring plan, which has already led to hundreds of store closures and layoffs.
- Analysts are watching closely as the company is expected to report earnings of 56 cents per share on $9.35 billion in revenue.
Starbucks on Edge Ahead of Crucial Earnings Report
All eyes are on Starbucks (SBUX) as it prepares to release its fiscal fourth-quarter earnings report after the bell on Wednesday. The mood is tense, with investors and Wall Street analysts widely expecting the coffee giant to report another period of disappointing results, marking a prolonged struggle to regain its footing in a competitive market.
Wall Street’s Bleak Projections
According to analysts surveyed by LSEG, the consensus forecast paints a concerning picture. Expectations are set for earnings per share (EPS) of 56 cents on revenue of $9.35 billion. However, the most alarming metric is same-store sales, which are projected to fall by 0.3%. If realized, this would be the seventh straight quarter of same-store sales declines, a trend that signals deep-seated issues with customer demand, particularly in its primary market of North America.
A Turnaround Plan Under Pressure
Under the leadership of CEO Brian Niccol, Starbucks has embarked on a turnaround strategy aimed at taking the chain back to its roots by enhancing the in-store experience and speeding up order times. Yet, this plan is facing significant headwinds. The company is battling fierce competition and increasingly price-conscious consumers in both the United States and China, its two largest markets.
Drastic Measures to Cut Costs
In a bid to stabilize its finances, Starbucks has initiated aggressive cost-cutting measures. Just a month ago, the company announced a $1 billion restructuring plan that includes the closure of hundreds of stores and a new round of layoffs for its non-retail employees. Furthermore, the company has been exploring the possibility of selling a stake in its China business to inject fresh capital and refocus its strategy.
Investor Patience Wears Thin
The sluggish pace of the turnaround has not gone unnoticed by the market. Shares of Starbucks have tumbled 7% this year, a dramatic contrast to the S&P 500’s impressive 17% gain over the same period. This underperformance has shrunk the company’s market capitalization to approximately $97 billion, leaving many investors questioning the long-term outlook for the once-unshakeable coffee empire. Wednesday’s earnings call will be a critical moment for leadership to convince stakeholders that their strategy can reverse the decline before more damage is done.