Starbucks’ sales keep falling, amping up turnaround stakes

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(Bloomberg) — Starbucks Corp.’s chief executive officer said the coffee chain is making progress in reviving growth, but flagging sales in the latest quarter and a flagging economy amped up pressure on the company’s new management to deliver.

Same-store sales declined 1% in the quarter ended March 30, falling short of Wall Street estimates. Earnings per share also missed expectations.

The company’s shares fell 11% at 9:31 a.m. in New York trading. The stock had declined 7% this year through Tuesday’s close, slightly more than the drop of the S&P 500 Index over the same period.

“I’d be remiss if I don’t first just mention the hard fact in front of us, which is our Q2 2025 financial results were disappointing,” Chief Executive Officer Brian Niccol said. “The thing I want you to know is behind the scenes, we really are showing a lot of signs of progress.”

Under Niccol, who started in September, Starbucks kicked off an overhaul of its cafes to make them more welcoming and jump-start growth after price increases, long lines and boycotts related to the company’s perceived stance on the war in the Middle East turned customers away.

Store strategies

The company is working to speed up service by adding more store workers and testing an algorithm to prioritize which orders to prepare first. The time to dispatch in-store orders dropped by an average of two minutes at participating locations, Niccol said in a call with analysts.

“It does sound as though the things that the new CEO can control are working out for them, in terms of slimming down the menu and trying to become more efficient,” said Don Nesbitt, a senior portfolio manager at F/m Investments, which owns Starbucks shares.

Starbucks is also looking at additional changes to its store footprint and operations, which could result in restructuring charges on top of expenses such as severance for workers who were laid off earlier this year. Given the costs, he urged investors to look past the company’s profit numbers “to track the progress we’re making to turn around the business.” Niccol said.

Starbucks is on the right path, but “the desired financial results will take a while,” Chief Financial Officer Cathy Smith told analysts.

As the company spends to chase longer-term growth, “earnings performance in upcoming quarters could remain under significant pressure,” Baird analyst David Tarantino said in a note to clients.

It doesn’t help that Starbucks is trying to pull off a turnaround project right as President Donald Trump’s trade war threatens to drive up prices and dings consumer confidence. Companies spanning Kraft Heinz Co. to JetBlue Airways Corp. and Chipotle Mexican Grill Inc. have warned that economic worries are spurring shoppers to pull back.

“Two steps forward, one step back,” BTIG analyst Peter Saleh said in a note to clients. “The consumer environment for middle- and upper-income consumers has clearly softened of late, as evidenced by Chipotle’s results last week and now, Starbucks.”

Niccol reiterated a promise to keep prices for customers steady through the end of the company’s fiscal year, which generally ends around late September.

Tariff impact

To minimize the impact of tariffs, Starbucks said it’s taking actions such as diversifying its coffee sources and redirecting shipment. The company is building up its stockpile of coffee, among other measures, to cope with volatile prices for arabica beans.

In North America, Starbucks’ biggest market, a decline in transactions drove a deeper-than-expected comparable sales drop. The international business performed better, with comparable sales rising 2%. China was also a bright spot, with flat sales coming in better than expected and improving markedly from the prior quarter.

The global comparable-sales results represent an improvement from the company’s previous quarter, when the measure fell 4%. It’s the fifth consecutive decline.

Investors’ patience may be tested by a protracted turnaround effort, “especially in a bear market,” said Bloomberg Intelligence analyst Michael Halen.