Softer footfall in the US and China remain key obstacles for the Seattle-based coffee chain, with new CEO Brian Niccol pledging to streamline store operations, re-think its marketing strategy and assess pricing to remain competitive
Starbucks is suspending its guidance for fiscal year 2025 | Photo credit: Ankur Madan
Starbucks must ‘fundamentally change’ its strategy to return to growth after posting a third consecutive quarter of falling sales, CEO Brian Niccol has urged.
In a preliminary earnings release, Starbucks reported that total full-year revenues increased 0.6% to $36.2bn during the 12 months ending 29 September 2024.
However, total like-for-like sales for the year fell 2% following its worst quarterly sales decline since the pandemic.
Underlining a concerning trend for the world’s largest coffee chain, total like-for-like sales fell 7% in the fourth quarter, following 4% and 3% declines in the previous two quarters. Fourth quarter net revenues fell 3% to $9.1bn.
In a press release, Starbucks said the fourth quarter sales decline was primarily driven by ‘softness’ in the US, where it operates more than 16,700 stores, including a 6% decline in like-for-like sales and a 10% fall in comparable transactions.
Fourth quarter like-for-like sales in China, the coffee chain’s second largest market with over 7,300 stores, fell 14% amid intensified branded coffee shop competition and constrained consumer spending. Starbucks posted an 8% year-on-year average ticket decline in China alongside a 6% fall in comparable transactions.
“Our fourth quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth and that’s exactly what we are doing with our ‘Back to Starbucks’ plan,” Niccol said.
Starbucks will release its full-year consolidated results on 30 September 2024 but is suspending its guidance for fiscal year 2025 to enable Niccol to ‘complete an assessment of the business and solidify key strategies’.
Niccol, who became Starbucks CEO in October 2024, shared a video alongside the preliminary earnings release reiterating his commitment to return the coffee chain to its roots, where ‘coffee comes first’.
The former Chipotle CEO said Starbucks must increase staffing and remove menu complexity to ensure baristas have the ‘time and tools to provide exceptional customer service’. Niccol also said Starbucks was ‘fundamentally changing’ its marketing – a strategy highlighted by the October 2024 appointment of Tressie Lieberman as the coffee chain’s first Global Chief Brand Officer.
Additionally, the coffee chain will assess its ‘pricing architecture’ to ensure it remains competitive on value and that ‘every customer feels Starbucks is worth it every single time they visit’.
On 14 October 2024, The Wall Street Journal reported that Niccol was scaling back Starbucks’ promotions in the US as part of his strategy to position the business as a premium coffeehouse.
Founded in 1971, Starbucks now operates more than 40,000 stores across 87 markets globally.