Conservative consumption and the rise of affordable coffee in China have led to Starbucks performance declining for three consecutive quarters

Starbucks has recently reported preliminary results for the current quarter, revealing another decline in sales as the coffee chain continues its struggle to turn a profit.

CEO Brian Niccol commented in the earnings statement, “The performance in Q4 clearly indicates that we need to fundamentally change our strategy in order to restore growth, which is exactly the goal of our ‘Return to Starbucks’ plan.”

Niccol is set to share more details about the company’s strategies to reverse its business fortunes during the earnings call scheduled for October 30.

The company projects a net sales drop of 3% to approximately $9.1 billion, with adjusted earnings per share estimated at $0.80. Analysts surveyed by LSEG had anticipated Q4 earnings per share of $1.03 and revenue of $9.38 billion.

Starbucks has now experienced a decline in comparable store sales for three consecutive quarters, with a 7% drop globally. The company attributes the weak sales to soft demand in North America, where same-store sales fell by 6%. Despite bolstering investments in the business, such as more frequent promotional offers through mobile apps and expanding the product range, foot traffic still decreased by 10%.

In China, Starbucks’ second-largest market, same-store sales plummeted by 14%. The company cites competition in the region as altering consumer behavior and necessitating changes to its market strategy.

Furthermore, Starbucks has suspended its guidance for fiscal year 2025, citing the recent change in leadership and “current business conditions.”

Despite the disappointing results, the company raised its dividend from $0.57 to $0.61 per share. CFO Rachel Ruggeri stated, “We aim to strengthen confidence in the business and provide a degree of certainty as we work towards turning a profit.”

Niccol took the helm of the coffee giant nearly two months ago with the goal of reversing the trend of stalled beverage demand, particularly in the U.S. and China. In the U.S., the chain has seen a loss in customers who are opting to save money instead of spending it on lattes and other energizing beverages. Since the pandemic, Starbucks has faced challenges reviving its business in China, as more affordable local competitors like Luckin Coffee have emerged, coupled with increasingly cautious consumer spending in recent months.