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- Starbucks unexpectedly released its fourth-quarter and annual financial results.
- The early announcement revealed a decline in sales across major markets, including the US and China.
- CEO Brian Niccol indicated plans for a comprehensive revitalization of the coffee chain.
Unexpected Earnings Report Signals Challenges Ahead
On Tuesday, Starbucks caught investors off guard by releasing its earnings report ahead of schedule, revealing significant challenges for new CEO Brian Niccol.
The company reported a 7% decrease in comparable sales for the fourth quarter, with US locations experiencing a 6% drop. In China, sales plummeted by 14% during the same timeframe. Overall global comparable sales fell by 2% for the entire fiscal year.
Suspension of Future Guidance Amid Transition
In light of the leadership change and current business conditions, Starbucks announced it would suspend guidance for its fiscal year 2025. A statement from the company emphasized that this pause will provide an opportunity to thoroughly evaluate operations and establish essential strategies aimed at stabilizing and fostering long-term growth.
The press release noted: “This approach will allow us to complete our assessment while positioning ourselves effectively for future success.”
A Dividend Increase Amidst Declining Sales
Despite these setbacks, Starbucks raised its dividend from $0.57 to $0.61 per share. Rachel Ruggeri, CFO of Starbucks, stated in the release: “We are crafting a strategy to revitalize our business; however, it requires time. Our goal is to reinforce confidence in our operations while providing stability as we navigate this turnaround process.”
This news led to shares dropping over 3% during after-hours trading sessions.
A Call for Reconnection with Customers
Nicol took office as CEO in September and shared insights via video regarding customer feedback that suggested Starbucks has “drifted from our core values.” He noted that some customers have reduced their visits as reflected in recent performance metrics.
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