Retail analyst suggests consumer attitudes might be shifting to 'unique or decadent treats instead of on classic drinks and pastries'

Starbucks Corp. on Tuesday said that getting back to coffee-shop basics would be even more important as consumers brace for the trade war's economic fallout. And it said that per-share profit wouldn't be the best gauge of its progress as it rethinks stores, staff and equipment in an effort to recharge sales and win back coffee drinkers.

But that message, at least for now, had yet to take hold for many investors, after the coffee chain's fiscal second-quarter results missed Wall Street's expectations. Shares of Starbucks $(SBUX)$ fell 6.4% after hours.

"Current market dynamics have given us even more focus and conviction to get back to Starbucks," Chief Executive Brian Niccol said on the company's earnings call on Tuesday.

And while the company pointed to signs that its plans were working - including rebounding market share and greater customer satisfaction amid efforts to cut wait times - Niccol said predicting where customers would be in the months ahead was difficult, and conceded that Starbucks' quarterly results were disappointing.

"I also believe there are better measures than EPS right now to track the progress we're making to turn around the business," he said.

For its fiscal second quarter, adjusted earnings per share were 41 cents. Starbucks had $8.76 billion in sales during the quarter. Same-store sales fell 1%, with a 2% decrease in the U.S.

Analysts polled by FactSet expected Starbucks to report adjusted earnings per share of 49 cents for its fiscal second quarter. They expected $8.83 billion in revenue for the quarter, with overall same-store sales down 0.8%.

Comparable transactions fell 2% during Starbucks' fiscal second quarter. In the prior quarter, they fell 6%.

Niccol also highlighted that trend as a sign its turnaround plans - which include making more welcoming stores, simplifying Starbucks' menu and making service more efficient - were on the right track. Niccol, who became chief executive last year, also oversaw the turnaround at Chipotle Mexican Grill Inc. $(CMG)$ following a food-safety scare roughly a decade ago.

Starbucks has struggled over the past year as consumers dealing with higher costs of living forgo coffee shops to focus on basics. Competition in the U.S. and China, consumers turned off by more smaller stores focused more on traffic and throughput, and calls for boycotts have also been issues.

That was all before President Donald Trump's sweeping new tariffs announced this month threatened to upend the global economic order and push prices higher for consumers.

Chief Financial Officer Cathy Smith, during Tuesday's call, said it sourced coffee from 28 countries, with most coming from Latin America, and that it was working on changing up its sourcing and redirecting shipments where needed. Its purchasing and hedging practices helped keep it insulated from swings in coffee prices.

Niccol said changes to the way its baristas work - including staffing up for mobile orders - rather than the deployment of equipment, had been more effective at handling orders for coffee and food more quickly. A test of a new order-sequencing algorithm helped bring down wait times in cafes by two minutes on average, he said. As it learns from those tests and expands them to other restaurants, Niccol said Starbucks has opted not to move ahead with installing cold-press and cold-brew equipment, and has paused the rollout of other equipment intended to make order prep faster.

Ahead of the results, some analysts had been worried about higher construction and equipment costs due to Trump's tariffs, and the backlash to U.S. brands abroad. And in the U.S., there were signs of steeper competition from some of Starbucks' smaller, less formal rivals.

Placer.ai, a firm that tracks retail foot traffic, said that while Starbucks continued to dominate the coffee-shop landscape in the U.S., visits to Starbucks stores during the first quarter of this year dipped 0.9% year over year, while visits to coffee chains overall were up 1.8%.

Placer.ai said those overall gains were likely driven by some of Starbucks' smaller rivals, like Dutch Bros Inc. (BROS) - a chain focused on flavored coffee with less pretension than Starbucks - Scooter's Coffee and 7 Brew Coffee. Starbucks executives and analysts in the past have described coffee as an "affordable luxury" in inflationary times. But Placer.ai suggested consumer attitudes might be shifting.

"Contrasting the growth of smaller coffee chains with Starbucks and Dunkin's," the firm said, "minor traffic dips may suggest that consumers prefer to spend their limited discretionary funds on unique or decadent treats instead of on classic drinks and pastries."

In its cafes, Starbucks has tried to add smaller touches, like ceramic mugs and more comfortable seating, to get customers to visit more often. Niccol, during the call on Tuesday, said reworked coffee houses would open in New York and in Southern California in the coming months.

He said those efforts, along with service times of under four minutes, would help Starbucks stand out, and were resonating with consumers. And, as with the remarks under previous management, he characterized coffee as a minor luxury.

"It is one of those things that people would say, 'look, this is a simple everyday luxury that I can still continue to participate in,' regardless of what some of the economic challenges are around them," he said.