Starbucks Reports Drop in Quarterly Profit

Profit dropped 47% to $558.3 million—well below market analysts' expectations of $732 million—due to increased operating expenses.

Starbucks has reported weaker-than-expected quarterly financial results but insisted they do not reflect the progress being made under its business recovery strategy, AFP reported.

Revenue for the third quarter declined by 3.8% to $9.46 billion. Profit dropped 47% to $558.3 million—well below market analysts' expectations of $732 million—due to increased operating expenses.

“While our quarterly financial results do not yet fully reflect the progress we've made, I see clear signs from our U.S. business that we are on the right track,” said CEO Laxman Narasimhan, who has led the company for ten months, during a call with analysts.

Starbucks’ CFO, Rachel Ruggeri, emphasized that the company is achieving real results. “We’re making tangible progress on our ‘Back to Starbucks’ strategy,” she said in a statement. Ruggeri noted that a tax expense reduced earnings per share by 11 cents, bringing it down to 49 cents.

Comparable sales in North America declined by 2%. Globally, they remained flat, with a 2% increase in China driven by a higher number of in-store transactions, even though the average spend per customer fell by 4%.

“We are clearly in the early stages of our U.S. recovery, but our momentum is building internationally,” Narasimhan added. He also stated that the company plans to introduce new products aimed at driving demand throughout the entire day—not just during morning hours—starting this year and into next. | BGNES

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