Starbucks profits fall again as CEO says brand ‘recovering’ from perceptions
Published on: Wednesday, July 31, 2024
By: AFP
Starbucks has reportedly cited weakening consumer sentiment and difficult market conditions in China as factors in its troubles. (AFP pic)
NEW YORK: Starbucks reported lower profits Tuesday behind broad-based sales declines, but shares rose as the company said a turnaround was on track.
The results came on the heels of a bruising April earnings report that drew a tough response on Wall Street, prompting Chief Executive Laxman Narasimhan to promise a reset.
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In the latest batch of results, Starbucks reported a three per cent drop in global comparable sales, a slight improvement from the four percent drop in the April quarter.
Narasimhan emphasised improved training, employee management and technology enhancements that are paying off. Business and operational indicators are improving “ahead of our financial results and our runway is long,” he said on a conference call with analysts.
“We’re recovering our brand from its perceptions,” Narasimhan said. “We’re rebuilding the operational foundation of our stores and supply chain.”
Starbucks has cited weakening consumer sentiment and difficult market conditions in China as factors in its troubles.
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But Narasimhan also pledged a sharper focus on operations to, for example, ensure a better fulfilment of customer orders during the morning rush hour.
The weak April results sparked a public comment from Howard Schultz, the company’s longtime chief whom Narasimhan succeeded in April 2023.
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The company also faces pressure from activist fund Elliott Investment Management, which took a stake in the chain and is pushing for ways to boost its share price, US media have reported.
Narasimhan confirmed Elliott’s stake and said conversations with the firm have been “constructive” for Starbucks.
Shares rose 5.1 percent in after-hours trading.
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