Starbucks shares tumbled following a challenging quarter marked by declining sales and mounting pressures on profitability, despite executives insisting their revitalisation strategy is gaining traction.
“Our financial results don’t yet reflect our progress, but we have real momentum with our ‘Back to Starbucks’ plan,” CEO Brian Niccol stated as he defended the company’s direction.
The coffee chain reported a 50% year-over-year drop in net income to $384.2 million, with global same-store sales falling 1% as customer transactions dipped across key markets.
The company attributed part of its margin contraction, which slid to 6.9% from 12.8%, to increased spending on labour and international promotions. Starbucks has shifted focus toward enhancing in-store service speeds and workforce support, halting equipment rollouts like its Cold Pressed Cold Brew system.
“We believe this evolved, labour-focused approach has more potential to improve throughput and connection while minimising future capital expenditures on equipment,” Niccol added. This pivot comes alongside corporate restructuring efforts, including the elimination of 1,100 roles and hundreds of unfilled positions to streamline operations.
External challenges loom large, with Chief Financial Officer Cathy Smith highlighting exposure to volatile coffee bean prices, which account for 10–15% of product costs.
“We expect that the balance of this fiscal year will bring some challenges as we navigate a dynamic macroeconomic environment, including tariffs and volatile coffee prices,” the company stated in a regulatory filing on Tuesday. These headwinds compound existing pressures as consumers in core markets like the U.S. and China increasingly opt for lower-priced alternatives.
In the U.S., transactions fell 4%, dragging same-store sales down 2%, while China reported flat sales despite higher customer traffic. Starbucks aims to counter these trends through store redesigns featuring premium seating and dedicated mobile-order zones, alongside menu simplifications to accelerate service. Niccol has prioritised reducing order times to under four minutes through optimised staffing and AI-driven workflow systems.
Looking ahead, the company plans to expand its global footprint to 55,000 stores by 2030 while refining formats like drive-thru-only locations and delivery-focused outlets. Digital growth remains central, with Starbucks Rewards membership climbing 13.8% to 34.6 million active users.
However, the suspension of its 2025 guidance reflects persistent uncertainties, particularly as unionisation efforts and commodity price swings threaten margin recovery. Shares fell 6% post-announcement, underscoring investor scepticism about the timeline for operational improvements.