Starbucks is struggling due to a decline in customers buying their favorite coffee from its stores. This doesn’t just apply to its U.S. stores, as the popular coffee chain is struggling worldwide too.
Due to a decline in sales, Starbucks has been trying various methods to regain customers. But will Starbucks regain its customers by the end of the 2024 fiscal year?
Starbucks’ Quarterly Revenue Down on Expectations
Due to being a worldwide coffee chain, experts predicted that Starbucks’ revenue would be a lot higher this quarter than it was. However, the actual revenue has fallen short of this.
While the company shares rose by more than 1% in extended trading, there was quite a large difference between what Wall Street was expecting the store to earn and what it actually earned.
Starbucks’ Revenue Is Down
One of the main issues for Starbucks is that its revenue is down this quarter. It was expected to bring in $9.24 billion in revenue. However, it only ended up bringing in $9.11 billion.
Starbucks’ earnings per share were the same as what was predicted. The earnings per share were predicted to be 93 cents, which ended up being 93 cents adjusted. However, there are various reasons why its revenue has gone down.
Starbucks’ High Prices
One of Starbucks’ main issues is its high prices, which customers are struggling to afford. For example, it cost one customer over $7 for two egg bites.
As customers are unable to afford these prices, they are either going to coffee shops with cheaper prices or making their own coffee at home. By making coffee at home, Starbucks customers have realized how much the coffee chain charges.
Customers Are Boycotting Starbucks
Customers have been boycotting Starbucks for various reasons — not all related to price. This is primarily due to the company’s perceived stance on global military actions.
Most stores hit the hardest by the boycotts are on college campuses. These boycotts are mainly responsible for Starbucks’ massive decline in sales.
Declining Sales for Two Quarters
The news of declining sales is further bad news for Starbucks, which has been declining for the last two quarters. Global stores that have been open for at least a year saw a 3% drop in sales.
Its North American stores suffered a similar fate, as sales declined by 2%. However, in the previous quarter, these sales dropped even further to 6%. Starbucks offset this drop by increasing its prices.
While this might be shocking, it’s nothing new. Many chain stores notice that customers are ditching them in favor of cheaper stores that sell the same thing or make the food and drinks at home.
The universal reason for this is that chains are continuously raising their prices. Due to the cost of living, their customers can no longer afford these prices and refuse to pay them when they can barely afford to pay their bills.
The Problem With China
One of Starbucks’s main global issues is with China. Their economic recovery has been much slower than expected, with competitors who have lower costs gaining a more significant share of the market.
In China, transaction volume and receipt size decreased by 7% in the June quarter. As China is Starbucks’ second-largest market, this will only cause more worry to investors.
How Will Starbucks Improve?
Starbucks predicts that its sales will start to improve by the end of the fourth quarter. To achieve this, the company has been devising ideas to attract customers back through its doors.
Some of their plans include having higher efficiency during busy hours, products specifically appealing to young people and offering better value for money. But whether these plans will work remains a mystery.
Starbucks Has Promised New Drinks
One thing that makes Starbucks unique and has always drawn customers to it is its drinks, which aren’t available anywhere else. As this has worked in the past, the coffee chain plans to introduce new drinks to its menu.
They are planning to release a homemade energy drink, the first of its kind for the store. They are also planning to release a sugar-free menu in the hope of drawing in customers who are a bit more health conscious.
A Focus on Cold Drinks
Starbucks is typically known for its hot drinks. However, there has been a rise in demand for cold drinks in recent years, so much so that 76% of total beverage sales in the U.S. are for cold drinks.
This is why Starbucks is promising cold drinks — not necessarily because it’s summer and people prefer cold beverages, but because people generally prefer cold drinks.
Starbucks’ Plans for 2024
Due to a continuous decline in sales and revenue, Starbucks will discuss these numbers and what it can do to improve in an upcoming conference call.
It has predicted revenue growth of a low single-digit percentage, which isn’t a great outlook for the company. Only time will tell whether the current plans will help sales increase or whether customers will continue to boycott Starbucks.
