MW Starbucks results miss estimates, but CEO expresses confidence in turnaround

By Bill Peters

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

Starbucks Corp. on Tuesday reported fiscal second-quarter results that missed expectations, amid what its chief executive described as a "tough consumer environment."

Adjusted earnings per share were 41 cents during the period. Starbucks $(SBUX)$ had $8.76 billion in sales during the quarter. Same-store sales fell 1%.

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 same-store sales down 0.8%.

Shares fell 1.3% after hours on Tuesday. But Chief Executive Brian Niccol expressed confidence in the company's turnaround plans.

"My optimism has turned into confidence that our 'Back to Starbucks' plan is the right strategy to turn the business around and to unlock opportunities ahead," he said in a statement.

"Improving transaction comp in a tough consumer environment at our scale is a testament to the power of our brand and partners getting 'Back to Starbucks.' We are on track and if anything, I see more opportunity than I imagined," he continued.

Cathy Smith, Starbucks' chief financial officer, said the results were "far from Starbucks' potential." But she said the company was developing new ways to "test, iterate and scale quickly" to grow the business longer-term.

Starbucks last year brought in Niccol as its new chief executive and announced plans to renew its focus on coffee, simplify its menu and clean up order processing. It also said it would take steps to make the atmosphere in its stores warmer and more welcoming as it tries to revive sales and win back customers.

But as President Donald Trump's sweeping new tariffs announced this month threaten to upend the global economic order and push prices higher for consumers, Starbucks' investors have been focused on how much friction the trade war is causing for shoppers and the chain's turnaround plans.

Ahead of the results, Wall Street's expectations were subdued for the coffee chain, which is dealing with competition in the U.S. and in China. Uncertainty about the trade war could make consumers more cautious. Some analysts have been worried about higher construction and equipment costs, and the backlash to U.S. brands abroad.

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 the overall gains were likely driven by some of Starbucks' smaller rivals, like Dutch Bros Inc. (BROS) - which has expanded rapidly - Scooter's Coffee and 7 Brew Coffee. Starbucks executives have in the past 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."

-Bill Peters

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April 29, 2025 16:25 ET (20:25 GMT)

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