Starbucks scrapped 2025 guidance after declining sales and earnings

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Starbucks suspended its financial guidance after it unexpectedly released results that showed a drop in revenue and a sharp drop in quarterly earnings.

The preliminary results, released more than a week ahead of schedule, are the first under new chief executive Brian Nicol, who joined the world's largest coffee chain last month.

Global comparable-store sales fell 7 percent year over year in its fiscal fourth quarter as transactions at its U.S. stores fell a tenth. Net revenue fell 3 percent to $9.1 billion in the three months to September, and earnings on a per-share basis fell 25 percent year over year.

“Given the company's CEO transition along with the current state of the business, guidance will be deferred for the entire fiscal year 2025,” which has just begun, the company said.

Starbucks' business has weakened as customers balk at its drink prices and long lines during busy store hours. The company faces tough competition in China, a key market for its growth.

The company ousted former CEO Laxman Narasimhan in August and hired Nickle, who is credited with turning around burrito chain Chipotle Mexican Grill. Nicole has set a vision to recreate the cozy atmosphere found in Starbucks locations in its early days, saying he will focus on the chain's US stores first.

In a video released Tuesday, Nicoll said it's clear that we need to fundamentally change our recent strategy to return to growth. He outlined plans including simplifying an “overly complex” menu, defining the pricing architecture and changing its mobile ordering and payment systems “so that it doesn't overwhelm the cafe experience”.

“We need to focus on what has always set us apart – a welcoming coffee house where people gather and where we serve the best coffee hand-crafted by our skilled baristas,” he said.

Although it reported lower profits, the chain raised its quarterly dividend to 61 cents a share from 57 cents. Chief financial officer Rachel Ruggeri said: “We want to increase our confidence in the business, and provide some certainty as we drive our turnaround.”

Comparable sales at US locations fell 6 percent in the quarter, as higher bill transactions paid by customers were more than offset by a 10 percent decline.

Comparable store sales in China fell 14 percent, “due to intense competition and a softer macro environment that impacted consumer spending”, the company said.

The company is scheduled to release full results on October 30. Shares of Starbucks fell 3.5 percent in pre-market trading on Wednesday.