Revamp
The restructuring program includes simplification of the menu, optimizing mobile ordering, and new store design. As part of the reorganization, the company recently announced plans to lay off around 1,100 corporate employees and not to fill several open positions, marking the largest downsizing in its history. Of late, Starbucks has been facing a demand slowdown in certain regions including China, its biggest market outside the U.S. Economic slowdown in the Asian country and growing competition from local brewers like Luckin Coffee remain a challenge.
From Starbucks’ Q1 2025 earnings call:
“Our work to reintroduce our brand is just beginning, but our core business is already strengthening, demonstrating that when we talk about our business, customers respond. Through the quarter, we saw a shift in our sales mix toward coffee and espresso-based beverages, which over-delivered and compensated for lower-than-expected performance across our holiday promotions. We’ve been focused on simplifying our menu to position partners for success, improve consistency, drive customer satisfaction, and enhance our economics.”
Pricing
While the company has achieved some success in attracting customers through promotional offers, its prices remain among the highest in the coffee space. It is important to have a competitive pricing strategy because several new players have entered the market in recent years, including in the US. According to the company, it is making progress in engaging non-rewards customers — frequent store visitors who are not part of the rewards program — through the revival program.
In the first three months of fiscal 2025, earnings dropped to $780.8 million or $0.69 per share from $1.02 billion or $0.90 per share in the same period of the prior year. Meanwhile, Q1 revenues remained broadly unchanged at $9.40 billion. Global comparable store sales dropped 4%, marking the fourth consecutive decline.
Results Beat
There was a 6% fall in comparable transactions, which was partially offset by a 3% increase in average ticket. At the end of the quarter, the company had a total of 34.6 million active members in the US. Sales and profit surpassed the market’s expectations, after missing in Q4 2024.
On Wednesday, Starbucks’ stock opened higher, partly reversing the weakness experienced in the previous sessions. SBUX has been trading above its long-term average of $91.57 since the beginning of 2025.