Starbucks Corporation (NASDAQ: SBUX) shares dropped by 6% after the company announced its fiscal second-quarter 2025 results, which did not meet Wall Street’s expectations.
The disappointing earnings report revealed ongoing problems in both global and key U.S. markets, raising doubts about the company’s efforts to turn things around.
Starbucks reported total net revenues of $8.8 billion, a slight 2% increase from last year, but just short of what analysts predicted. Adjusted earnings per share fell to $0.41 from $0.68 a year earlier, missing the forecast.
Global comparable store sales decreased by 1%, primarily due to a 2% drop in customer visits, although this was somewhat offset by a 1% rise in the average amount spent per transaction.
In the U.S., Starbucks’ largest market, same-store sales declined by 2%, marking the fifth quarter in a row of falling sales. Customer traffic decreased by 4%, while the average transaction amount grew by 3%. The North American segment’s operating income fell sharply because of higher labor costs and ongoing spending on store operations.
Internationally, Starbucks saw a 6% increase in net revenues, thanks to new store openings and growth in its licensed store business. Comparable store sales outside North America grew by 2%, with a 3% rise in transactions but a 1% drop in the average amount spent per visit. In China, same-store sales were flat after four quarters of decline.
CEO Brian Niccol expressed confidence in the company’s turnaround plan, which aims to improve in-store experiences and reconnect with customers. However, the absence of a formal financial outlook for the next quarter and a recent change in CFO have raised concerns among investors.
Analysts have downgraded the stock and lowered price targets, citing challenges like weaker consumer spending and increased competition.
As Starbucks faces a tough economic landscape, investors are looking for clear signs that demand is recovering, especially in the U.S. market.
With the stock down for the year and analysts adjusting earnings expectations downward, the next few quarters are crucial for the company to show that its turnaround efforts can lead to steady growth and better profits.