Starbucks Reports Disappointing Earnings As Pressures To Turn A Corner Mount – CoffeeTalk

Starbucks reported weaker-than-expected earnings and another quarter of same-store sales declines, but the company said its turnaround strategy is showing early signs of success. CEO Brian Niccol said that the company has real momentum with its ‘Back to Starbucks’ plan, which includes scaling back plans to automate more coffee-making and investing more in labor. This weighed on earnings during the quarter.

The company also faces external challenges that could hit earnings, such as trade conflicts sparked by President Donald Trump’s new tariffs, which will likely affect coffee beans and consumers buying the drinks made with them. About 10% to 15% of Starbucks’ product and distribution costs come from green coffee, or raw, unroasted beans. The company expects some challenges as it navigates a dynamic macroeconomic environment, including tariffs and volatile coffee prices.

Shares of the company fell nearly 9% in premarket trading Wednesday. The company reported fiscal second-quarter net income attributable to the company of $384.2 million, or 34 cents per share, halved from $772.4 million, or 68 cents per share, a year earlier. The operating margin fell to 6.9% from 12.8% as Starbucks spent more to kick-start its comeback. Labor costs rose as it staffed its U.S. cafes with more baristas.

While Starbucks is spending more on labor, the company is cutting back on how much it is putting into equipment. It is no longer planning to deploy its Cold Pressed Cold Brew system and has paused the rollout of equipment used to heat food. The company believes this evolved, labor-focused approach has more potential to improve throughput and connection while minimizing future capital expenditures on equipment.

Outside its home market, the company spent more on promotions to drive traffic to its stores and accrued restructuring costs for the steps it has taken to simplify its global corporate organization. Excluding restructuring costs, the company earned 41 cents per share.

Under CEO Brian Niccol, Starbucks has been trying to turn around its U.S. business by getting “back to Starbucks” and returning its focus to coffee and the customer experience. While the early stages of the turnaround have not yielded improvements in financial results, the company’s new marketing is resonating with customers and service speeds are improving.

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