Starbucks bets on protein drinks to revive lagging US sales
What's the story
Starbucks has witnessed a sixth consecutive quarter of declining sales in the US. The coffee giant is now introducing a host of new strategies and products to revive its fortunes. These include protein drinks, faster service, and store upgrades. Despite these efforts showing early promise, weak domestic demand continues to impact overall performance.
Financial performance
Fiscal 3rd-quarter revenue beats expectations, but same-store sales fall
In its fiscal third quarter, Starbucks reported a 4% increase in revenue to $9.5 billion, surpassing Wall Street's forecast of $9.3 billion. The company's net income dropped by 47% to $558 million for the quarter. Same-store sales in the US fell by 2%, marking the sixth consecutive quarterly decline, which was larger than anticipated. Even though US customers are spending more per visit, transactions have decreased by 4%, indicating lower foot traffic at stores.
Global expansion
Growth in China and expansion plans
Starbucks's second-largest market, China, has witnessed growth in same-store sales. CEO Laxman Narasimhan said the company is considering around 20 partnership offers to expand in smaller Chinese cities. "We remain committed to our China business and want to retain a meaningful stake," Narasimhan said. He added that the strong interest in partnerships is a testament to Starbucks' great team, strong brand, and long-term opportunity in China.
Recovery plan
New service model to be launched nationwide
To tackle the challenges in the US market, Starbucks will launch its new "Green Apron Service" model nationwide in mid-August. The system, which has already been tested in 1,500 stores, aims to improve service during peak hours by setting new staffing and hospitality standards. The company is also streamlining operations with new software that sequences orders and reduces wait times.