Starbucks revenue misses estimates as same-store sales decline for second straight quarter

Starbucks on Tuesday reported quarterly revenue that missed analysts’ expectations as both its U.S. and international cafes faced weaker demand.

Shares of the company rose more than 2% in extended trading.

Here is what the company reported compared to what Wall Street was expecting, based on a survey of analysts by LSEG:

• Earnings per share: 93 cents adjusted vs. 93 cents expected
• Revenue: $9.11 billion vs. $9.24 billion expected

The coffee giant reported fiscal third-quarter net income attributable to the company of $1.05 billion, or 93 cents per share, down from $1.14 billion, or 99 cents per share, a year earlier.

Excluding items, Starbucks earned 93 cents per share.

Net sales dropped 1% to $9.11 billion. The company’s same-store sales fell 3% in the quarter, fueled by a 5% decline in transactions.

Traffic to its U.S. stores fell again this quarter, dropping 6%. Domestic same-store sales fell 2%, boosted by an increase in average ticket. Last quarter, executives discussed plans to revive the lagging U.S. business that included leaning on discounts and new drinks to bring back customers who had abandoned the chain.

CEO Laxman Narasimhan said on Tuesday that the company sees green shoots in the U.S. business already, like the success of new products. Its Summer-Berry Refreshers drinks with boba-inspired pearls broke the company’s record for a week-one product launch. Next quarter will also bring the return of its Pumpkin Spice drinks, a perennial favorite since its launch more than two decades ago.

The company now allows customers to order via its mobile app and pay without joining its rewards program. Improvements to its app also mean that it’s more accurate at predicting when an order will be ready, lowering customer complaints. In a letter posted on LinkedIn after last quarter’s gloomy report, former CEO Howard Schultz said the company needed to fix the mobile app experience to win back customers.

Schultz isn’t the only investor upset with Starbucks’ performance lately. Activist hedge fund Elliott Management has accrued a stake in Starbucks. Narasimhan acknowledged that the firm is a shareholder in Starbucks and said conversations so far have been constructive.

Outside of North America, same-store sales slid 7%. In China, Starbucks’ second-largest market, same-store sales tumbled 14% as both average ticket and transactions shrank.

Starbucks has faced stiffer competition in China from local coffee shops that undercut the coffee giant on price. But there are encouraging signs in the country, too. Average daily transactions and weekly sales in China have improved sequentially quarter-over-quarter, according to Narasimhan.

The company is in the “early stages” of exploring strategic partnerships to accelerate its growth in China, Narasimhan said. It’s unclear what kind of shape that partnership could take.

Starbucks opened 526 net new stores in the fiscal quarter.

The company reiterated the outlook it provided last quarter. The company projects revenue growth of a low single-digit percentage and earnings per share growth in a range of flat to a low single-digit percentage.