Starbucks posts record revenue but lowers outlook on heels of bumpy quarter

Marianne Wilson
Editor-in-Chief
starbucks LA
Starbucks ended the quarter with 38,587 stores.

Starbucks Corp. reported record revenue but missed Street estimates amid a rocky quarter that included boycotts and a more cautious consumer in one of its key markets. 

In the coffee giant’s first-quarter earnings call, Starbucks CEO Laxman Narasimhan blamed three headwinds for the company’s disappointing results: negative impact to its business in the Middle East; “misperceptions” about its position on the Middle East; and a softening of U.S. traffic in the afternoons. It also experienced a slower-than-expected recovery in China, driven by a “more cautious” consumer. 

Starbucks was hit with boycotts in the Middle East and elsewhere after it sued Workers United  — the union that has organized workers in at least 370 U.S. stores — in October over a pro-Palestinian message posted on a union social media account.

“I am deeply distressed by the violence shaking the region," Narasimhan told analysts on the call. “As I have shared, Starbucks condemns violence against the innocent, hate and weaponized speech. We are intensely focused on supporting our partners and the many other stakeholders affected by what is taking place. We have seen a significant impact on traffic and sales in the region and we are working with our licensees during this time to ensure the safety and well-being of our partners and our customers.

Starbucks also faced employee work stoppages related to union contracts during the quarter. Narasimhan said that the company wants to restart negotiations with Workers United.

Starbucks reported net income of $1.02 billion for its first quarter (ended Dec. 31), up from $855.2 million in the year-ago period. Adjusted earnings were $0.90 per share, compared to $0.74 per share. Analysts had forecast earnings of $0.93 per share

Consolidated net revenues rose 8% to $9.43 billion, below estimates for $9.6 billion. Same-store sales rose 5%, driven by a 3% increase in comparable transactions and 2% increase in average ticket.

North America and U.S. comparable store sales increased 5%, driven by a 4% increase in average ticket and 1% increase in comparable transactions. During the quarter, Starbucks Rewards loyalty program’s 90-day active U.S. members increased to 34.3 million, rising 13% year-over-year.

Starbucks' international comp sales increased 7%, driven by a 11% increase in comparable transactions and 3% decline in average ticket. China's comp sales increased 10%, driven by a 21% increase in comparable transactions and 9% decline in average ticket. 

At the end the quarter, stores in the U.S. and China comprised 61% of the company’s global portfolio, with 16,466 and 6,975 stores in the U.S. and China, respectively. On the earnings call, Narasimhan said the company is “well on track to hit our 9,000-store target by 2025 and continue to have full confidence in the market opportunity.

Starbucks  now expects revenue to increase between 7% and 10% in its current fiscal year, down from its previous forecast of 10-12% growth. Global same-store sales are expected to rise between 4% and 6%, down from the previous range of 5-7%. But the company reiterated its forecast for fiscal 2024 earnings per share growth.

“Despite headwinds, our brand is very strong, and that coupled with innovation and a relentless focus on our green apron partners form long-term differentiators, along with focused execution on Triple Shot Reinvention, will drive balanced and attractive earnings growth,” Narasimhan stated in the earnings release.

Starbucks opened 549 net new stores during the quarter, ending the period with 38,587 stores (51% company-operated and 49% licensed).

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