Turning around Starbucks will take more time.
Executives at the coffee giant said late Tuesday that while they see early signs that the business is stabilizing, there is still much more work to be done.
“We know this turnaround is a multiyear effort,” Cathy Smith, the chief financial officer, told Wall Street analysts and investors on the quarterly earnings call. “A lot is happening today behind the scenes, and these efforts will come together more visibly by the end of next year, and when they do, I am highly confident that our financial performance will follow.”
Starbucks reported that global same-store sales at for the three months ending in June fell 2 percent from a year earlier. It marked the sixth consecutive quarterly decline at stores open at least a year.
Overall, global revenue rose 4 percent to $9.5 billion in the quarter while net earnings per share fell 47 percent from year-earlier levels.
In aftermarket trading on Tuesday, Starbucks stock rose 3.7 percent.
Heightened competition from other coffee chains as well as belt-tightening among some cost-conscious consumers has reduced traffic and spending at Starbucks for more than a year, particularly in the United States.
In the United States, same-store sales fell 2 percent in the quarter, led by a 4 percent decline in transactions.
Since joining the company as chief executive last September, Brian Niccol has raced to try to put the coffee chain on more solid ground. Much of his effort has focused on addressing frequent customer complaints, from long wait times for coffees to a lack of seating at stores.
In recent months, Starbucks has been hiring more baristas to whip up Caramel Macchiatos and Mango Dragonfruit Lemonade Refreshers so customers can receive them faster. It removed some items from the menu that were either infrequently ordered or ate up too much time for baristas to make. Some locations are being renovated, often restoring seating that was removed during the pandemic.
Starbucks has also been testing an order-sequencing program to speed up customers’ orders, especially during peak periods, with a goal of completing orders in less than four minutes.
Those efforts are part of a broader new operations model that was being tested in 2,000 stores. The company was so pleased with the shorter transaction times and higher customer satisfaction that it plans to roll out the model to all of its stores, starting in the coming weeks.
But those costs — particularly the hiring of additional baristas and other workers — are cutting deeply into profits. The company’s operating margin slumped to 13 percent in the quarter from 21 percent a year ago.
“We’ve had to fix a lot, but we’ve done the hard work on the hard things,” Mr. Niccol said.
To drive customers through its doors, Mr. Niccol said the company is leaning on new offerings like a cold foam topping for its drinks that will deliver 15 grams of protein.
The company is also looking to offer new drinks and snacks to entice in the afternoons.
But Mr. Niccol said the company would shy away from discounting its beverages, arguing that Starbucks is offering a premium product with a premium service. And after pledging to not raise prices in fiscal year 2025, he left the door open into next year.
“There are times where it makes sense” to raise prices, “and when those situations present itself, we’re going to do it in the least amount of pricing necessary,” Mr. Niccol told analysts. “So will we have to use it in the future? Absolutely. It’s going to be the last lever I’d like to pull. And when we pull that lever, I probably want to do as little as possible.”
A bright spot on the call was Starbucks’s business in China. There, same-store sales rose 2 percent from year-earlier levels. It is the first increase since early 2024.
China is Starbucks’s second-largest business and the company has made a major bet there. But it has faced heightened competition, and sales in China have struggled over the past year.
The company, which had previously said it was seeking a strategic partner in China, said it had received interest from 20 different parties and that it is evaluating options. Mr. Niccol did not provide an update on the timing of any deal.
“We remain committed to our China business and want to retain a meaningful state,” Mr. Niccol said.
Julie Creswell is a business reporter covering the food industry for The Times, writing about all aspects of food, including farming, food inflation, supply-chain disruptions and climate change.
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