Starbucks Revenues were weaker and retail sales fell in the same-store sales, but the coffee giant said its turnaround strategy was showing early signs of success.
"Our financial results have not yet reflected our progress, but our Back to Starbucks program has real motivation," CEO Brian Niccol said in a video posted on the company's website. "We are testing and learning at speed, and we are seeing changes in the cafe."
Some of these adjustments include a reduction in plans to automate more coffee production and invest in the workforce, which puts revenues in the quarter seriously.
"At this stage of our turnaround,[EPS]should not be a measure of our success," Nicole said on Tuesday's earnings call.
But the company also faces external challenges that could achieve profits. Trade conflicts triggered by President Donald Trump’s new tariffs could affect coffee beans, while consumers buy them. According to Cathy Smith, CFO, who recently joined the company, about 10 to 15% of Starbucks’ product and distribution costs come from green coffee or unbaked beans.
"We expect balances for this fiscal year will present some challenges as we drive a dynamic macroeconomic environment, including tariffs and fluctuating coffee prices," the company said in a regulatory filing on Tuesday.
The company's shares fell 6% in expansion trading.
According to LSEG's survey of analysts, the company reported what the company reported:
Starbucks reported that it was attributed to the company's second-quarter net income of $384.2 million (34 cents per share) a year ago, or half of $772.4 million a year ago.
As Starbucks spent more time starting to make a comeback, the company's operating margin fell from 12.8% to 6.9%. Labor costs have risen because it comes with more cafes.
Although Starbucks spends more time on the workforce, the company is reducing the amount of equipment invested. Nick said it no longer plans to deploy its cold pressure brewing system, and the company suspended the rollout of equipment for heating food.
"We believe this evolving workforce-centric approach has greater potential to improve throughput and connections while minimizing future capital expenditures for equipment," he said.
Outside its domestic market, the company has spent more time on promotions to drive traffic to its stores. It also cumulative restructuring costs to simplify the steps taken by its global corporate organizations.
Excluding restructuring costs, the company earns 41 cents per share.
Net sales rose 2% to $8.76 billion, but Starbucks fell same-store sales for the fifth consecutive quarter. The company seeks cheap coffee options for consumers in the U.S. and China (the two of its largest markets).
Under Niccol, Niccol accepted the Ins Rope in September, which has been trying to reverse its U.S. business by “Back to Starbucks” and focusing on its coffee and customer experience.
Niccol said that while the early stages of turnover did not improve its financial performance, Niccol said the company's new marketing is resonating with customers and the service speed is increasing. One of his goals is to complete each order in four minutes or less.
Still, the company's global same-store sales fell 1% in the second quarter, due to a 2% decline in transactions. In Starbucks’ home market, traffic declines are even steeper.
U.S. locations traded down 4%, reducing its same-store sales by 2%. China's same-store sales remained flat in the quarter as lower average ticket shift transactions grew.
In October, the company suspended its fiscal 2025 forecast as it reveals an early stage of its turnaround strategy. The plan includes layoffs for its white-collar workers. In late February, Starbucks announced it would cut 1,100 corporate positions, as well as hundreds of unfilled roles as part of the turnaround plan.
Looking ahead, Starbucks plans to improve the cafe with better seating and "quality touch" in a bid to lure customers to linger. The company also plans to improve its innovation process and improve customer experience by determining the personnel level, standards and algorithms of beverages.