New Delhi

Starbucks posted preliminary quarter four (Q4) results that took the Street by surprise on Tuesday afternoon. The company reported quarterly revenue that fell 3 per cent year over year to $9.1 billion, while earnings per share fell 24 per cent to $0.80.

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Starbucks also suspended its full-year fiscal 2025 guidance, citing its transition to new CEO Brian Niccol and to allow time to re-strategize. Due to this development shares of the company quickly dropped 3 per cent in after-market trading.

US same-store sales decreased 6 per cent year over year in Q4, with a 10 per cent decline in foot traffic and a 4 per cent increase in the average ticket.

Its much-publicized in-app promotions and deals haven't moved the needle. The company's pairing menu, which offered US customers a small coffee with a croissant or breakfast sandwich for $5 or $6, "did not improve customer behaviours," as per its release.

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Intensified competition impacts sales in China

Starbucks China's same-store sales fell 14 per cent, with a 6 per cent drop in foot traffic and an 8 per cent decline in the average ticket size. The company attributed the performance to "intensified competition and a soft macro environment that impacted consumer spending."

Prior to the report, Starbucks shares were up 3 per cent year to date, but up 10 per cent in the past six months after investors grew optimistic about former Chipotle (CMG) CEO Niccol taking the helm. The company still plans to release its official fourth quarter and full fiscal year 2024 financial results after market close on Oct. 30.

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The Yahoo Finance report further stated that the number shows the long road ahead for Niccol as he tries to get Starbucks back on track. He has initiated a change in the management ranks, including bringing in long-time friend Tressie Lieberman as global chief brand officer. Liberman will start on November  4 after her most recent role as Yahoo CMO.

In a video posted on Starbucks' site, Niccol re-emphasized some of the key issues he outlined in a letter during his first week, including the need to simplify its menu, fix its pricing and value perception, and build return customers.

"We're fundamentally changing our marketing. We’ve been focusing on Starbucks Rewards customers, rather than talking to all our customers. We’re changing quickly, as you likely have already seen," said Niccol, known in his career for his marketing expertise.

“I believe that our problems are very fixable and that we have significant strengths to build on. I’ve spent my career understanding, stewarding, and building brands, and it’s clear the Starbucks brand is strong and enduring,” he added. Market participants and investors will closely follow the developments in company to take informed investment decisions in the future.