Starbucks (SBUX): A look at the coffeehouse chain’s plans for its two key markets

Shares of Starbucks Corporation (NASDAQ: SBUX) were down over 1% on Friday. The stock has dropped 14% over the past three months. The company saw sales and profits decline during its most recent quarter, as it faced a challenging operating environment across many of its markets. Its two major markets, the US and China, were no different. Here’s a look at the performance of these two regions and the company’s plans for them:

US

Starbucks saw its revenues in the US remain flat at $5.9 billion in the second quarter of 2024 compared to the same period a year ago. Comparable store sales declined 3%, driven by a 7% drop in comparable transactions, partly offset by a 4% increase in average ticket. The company recorded a 3% growth in store count in Q2 and ended the quarter with 16,600 stores in the region.

As mentioned on the quarterly conference call, a tough macroeconomic environment pressured customer traffic, and in the US, the company saw fewer visits from its more occasional customers. Tough weather conditions also took a toll on US comps in Q2.

Starbucks is working on improving its performance in the US market. As part of these efforts, it is working to meet demand across dayparts. It has been facing challenges in meeting heavy demand during its peak morning daypart and it is using technology to improve customer service and drive sales during this daypart. The company is also working on capturing unmet overnight and weekend demand which it believes will provide significant opportunity to drive growth over the long term.  

Starbucks also plans to launch new products for customers in the US. Its core coffee business continues to perform well. In Q2, 63% of the company’s beverage sales comprised cold beverages, up 1% from last year. As part of its product innovation, the coffee chain brought forth pistachio lattes and launched a new core iced shaken espresso. The company sees opportunity across both coffee and non-coffee in this market.

For the full year of 2024, US comparable sales are expected to range from a low-single-digit decline to flat. Starbucks expects its US store count to grow by approx. 4% for the year.

China

In Q2 2024, Starbucks’ revenues in China fell 8% year-over-year to $705.8 million. Comparable store sales declined 11%, driven by a 4% drop in comparable transactions and an 8% decrease in average ticket. The company recorded a 14% growth in its store count in Q2 and ended the period with a total of 7,093 stores in the region.

Starbucks saw a slower-than-expected recovery in China, with macro pressures negatively impacting traffic. As indicated on the call, performance in this region was impacted by factors like a decline in occasional customers, changing holiday patterns, and a highly promotional environment.

Despite these headwinds, Starbucks continues to see strong demand in China. It saw growth in its morning daypart in the region and achieved positive comp for delivery. It expanded its Starbucks Rewards membership to 21 million active members. It also launched 27 new products as part of its product innovation efforts through the second quarter.

Starbucks continues to execute on its strategy for the China market by offering more coffee forward, locally relevant product innovations, and making significant investments to improve its omnichannel capabilities. The company also plans to increase the percentage of new store openings in lower tier markets and new county cities where it sees stronger new store economics.

For full-year 2024, Starbucks forecasts a single-digit decline in comps and approx. 12% store growth for China.