Does Starbucks have a Venti-sized problem?

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Does Starbucks have a Venti-sized problem?

By Gina Acosta - 07/27/2018
Starbucks has said that its main strategic priority is to accelerate growth in its targeted long-term growth markets, especially China and the U.S.

Starbucks says it's making progress on delivering sustainable growth despite flattening sales, scandals and turnover in its executive ranks.

Starbucks reported that same store sales in the U.S. increased 1% during the third quarter, while comps decreased 2% in China, a market that is increasingly important for the company.

“While acknowledging a disappointing Q3, I want to be clear that we have 100 percent confidence in our growth strategy and the sustainability of the leadership position we have built in the market,” Chief Executive Officer Kevin Johnson said. 

Starbucks has said that its main strategic priority is to accelerate growth in its targeted long-term growth markets, especially China and the U.S. It is also trying to transform its value proposition into one that is focused on serving customers digitally. 

But the company has had a challenging year so far.

Starbucks lost its chief financial officer — news that came just days after Howard Schultz, credited with building Starbucks into a global powerhouse, left his post as executive chairman. The coffee chain has started an external search for a new CFO. The company also weathered a widely publicized discrimination scandal in Philadelphia in spring and recently got some backlash over its plan to eliminate plastic straws.

But Starbucks' main problem is that it doesn't seem to be attracting new customers. Its same-store sales and transaction growth in the United States has been on a downward trend for several quarters.

The coffee company did report adjusted earnings of 62 cents per share in the quarter ended July 1, beating analysts’ estimates of 61 cents. Revenue for the quarter came in at $6.31 billion versus estimates for $6.26 billion.

Looking ahead to the 2018 full year, the company said it expects to see EPS in the range of $2.40 to $2.42 and global same store sales growth to be just below the 3-5% targeted range.

Meanwhile competitors such as Dunkin' Donuts seem to be doing a better job of attracting consumers. Dunkin' Brands reported increased comps, revenue and profit in its second quarter report also this week.

"Our second quarter 2018 Dunkin' Donuts U.S. comparable store sales growth is an early sign of the progress we are making with our Blueprint for Growth," said David Hoffmann, Chief Executive Officer and President of Dunkin' Donuts U.S. "Our highest quarterly beverages sales on record underscored that we're on track towards our goal to be the nation's leading beverage-led, on-the-go brand. Along with our franchisees, we leveraged national marketing to launch the most comprehensive value program in the brand's history driving breakfast sandwich sales, which more than offset the impact of menu simplification. We have strong alignment with our franchisees on the brand's strategy and remain on track to open 50 NextGen new and remodeled restaurants this year with Dunkin' Donuts U.S. again expected to be one of the fastest-growing QSR brands by unit count in the country for 2018."

 

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