$Starbucks (SBUX.US)$The decline in quarterly sales was less than expected, indicating that the customer loss that once troubled this coffee chain is beginning to subside.
The company stated in its Earnings Reports on Tuesday that for the first fiscal quarter of 2025, ending December 29, same-store sales fell by 4%. This is an improvement compared to the 7% decline reported by Starbucks in the previous quarter and less than the 5.3% decline expected by Analysts surveyed by Bloomberg.
The Earnings Reports show that Starbucks' Q1 revenue was $9.4 billion, unchanged year-on-year, and exceeded market expectations by $90 million; the EPS was $0.69, higher than the market expectation of $0.67.
Since taking office in September last year, CEO Ryan Nicole has been taking actions to reshape the company, following a performance decline triggered by boycotts, price increases, and slow service. Recent measures to enhance the customer dining experience were implemented on Monday, including the reuse of ceramic cups and condiment bars. The company has also eliminated the extra charge for non-dairy milk and launched new advertisements focusing on its coffee tradition.
In a conference call with Analysts, Nicole stated that the company is reducing discounts and increasing marketing efforts "to showcase our coffee craftsmanship" and emphasizing the "high-quality experience derived from Starbucks." He mentioned that it is producing results, and the company is making "small steps in both areas, but moving in the right direction."
Performance shows that Starbucks has made progress, although it comes at the cost of profits. The EPS is slightly above the average expectation, while the volume of Trade in its largest market, North America, declined as expected. Due to increases in wages, benefits, and working hours, as well as the cancellation of the extra charge for non-dairy milk, the operating margin in that region has fallen.
In China, this key market, the decline in sales was less than analysts' expectations, with only a decrease of 6%.
Chief Financial Officer Rachel Ruggeri informed Analysts that due to the company's upcoming restructuring, severance pay and Other benefits will be paid, causing a surge in general and administrative expenses this quarter. EPS for this quarter is expected to be the lowest of the fiscal year.
Starbucks is seeking to prioritize customers and improve the in-store experience, starting first with the USA and Canada. As part of these efforts, the company has begun restricting cafes to only paying customers and their guests, a new policy that has caused division among baristas.
Nicole said the company also plans to cut 30% of its food and beverage offerings. He hopes to simplify the work for baristas and help customers placing orders in-store receive their drinks within four minutes or less. The company's app also features a development in progress that allows customers to choose a pickup time slot.
Starbucks plans to lay off employees before early March. Nicole stated in a memo announcing the layoffs that Starbucks has too many management levels and needs to be clearer about who makes decisions and who is responsible for achieving the goals.
Starbucks suspended its guidance for the fiscal year starting September 30 in October, stating that this move will give Nicole the opportunity to assess the Business and solidify the turnaround plan.
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