Starbucks once more falls short according to its CEO, who vows a surge of inventiveness
In a recent financial report, Starbucks has revealed its Q3 results for FY2025, showing a complex picture of growth and challenges as the company continues its "Back to Starbucks" turnaround strategy.
Despite a 3.8-4% increase in revenue, reaching $9.46-$9.5 billion, Starbucks' earnings per share (EPS) missed estimates, coming in at 50 cents - a 23.1% shortfall compared to the consensus estimate of 65 cents. This decline is attributed to expense deleverage and investments in the turnaround strategy, including labor costs and the Leadership Experience 2025 event.
The global comparable sales also saw a two percent drop, including a 2% decline in the U.S., primarily due to expense increases and store traffic challenges. However, Starbucks is investing in faster staffing, new drive-through structures, and improved customer experience to address these issues.
CEO Brian Niccol expressed optimism, stating that the turnaround is "ahead of plan." Yet, investors are still awaiting concrete results and a clear timeline from Starbucks. Post-market, Starbucks' stock fell by around four percent, reflecting the uncertainty in the market.
The financial numbers suggest that Starbucks' turnaround is ambitious but not yet visible. The ongoing business operations continue to face pressure, especially in North America, where the operating margin fell well below the target of 16.1 percent, landing at 13.3 percent.
Starbucks has managed to reduce construction costs by 30 percent, a significant achievement in the company's efforts to improve store experience through capital discipline. The company is also focusing on enhancing customer engagement and menu innovation to support long-term growth.
As Starbucks moves forward with its four-pillar strategy, the focus remains on investing in employees, improving store experience, enhancing customer engagement, and launching innovations to boost growth. The company is committed to maintaining disciplined capital allocation and a strong balance sheet while continuing shareholder returns via dividends.
In light of these developments, it's clear that Starbucks is making strategic moves to drive a turnaround. However, more announcements and concrete results are needed to ignite new impulses at the company. As of now, Starbucks is not a recommended investment by AKTIONÄR. The company's underperformance in Q3 FY2025, coupled with a meager gain of 2.7 percent compared to the S&P 500 since the beginning of the year, underscores the need for continued progress and visible results in the coming quarters.
The financial report reveals that Starbucks is investing a significant portion of its resources in the "Back to Starbucks" turnaround strategy, which includes labor costs and the Leadership Experience 2025 event.
Despite the ambitious four-pillar strategy focused on employees, store experience, customer engagement, and menu innovations, Starbucks' Q3 FY2025 results show a need for continued progress and visible results in the upcoming quarters, as the company's shares are not currently recommended for investment by AKTIONÄR.
