Starbucks (SBUX) stock plunged more than 15% at the start of Wednesday's trading session after the coffee retailer came up short of top- and bottom-line expectations for its fiscal second quarter and lowered its full-year outlook.
In the three months ended March 31, Starbucks said its revenue decreased 2% from the year-ago period to $8.6 billion. Earnings per share (EPS) were down 14% to 68 cents, while global comparable-store sales fell 4% from its fiscal Q2 2023.
"In a highly challenged environment, this quarter's results do not reflect the power of our brand, our capabilities or the opportunities ahead," Starbucks CEO Laxman Narasimhan said in a statement. "It did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us."
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
The quarterly results fell woefully short of analysts' expectations. According to CNBC, Wall Street was calling for revenue of $9.1 billion, earnings of 79 cents per share and global comparable-store sales growth of 1%.
As a result of the disappointing first half of the year, Starbucks lowered its full-year outlook, with Narasimhan citing "a more cautious consumer" as one of the reasons for the downwardly revised forecast.
On the company's conference call, Starbucks Chief Financial Officer Rachel Ruggeri said fiscal 2024 revenue growth is now expected to be in the low single digits from its previous range of 7% to 10%, and EPS growth in the range of flat to low single digits from its previous range of 15% to 20%.
"While it was a difficult quarter, we learned from our own underperformance and sharpened our focus with a comprehensive roadmap of well thought out actions making the path forward clear," Ruggeri said. "On this path, we remain committed to our disciplined approach to capital allocation as we navigate this complex and dynamic environment."
Where does Starbucks stock stand with analysts?
Starbucks was already struggling on the charts ahead of its fiscal Q2 results. Shares were down nearly 8% for the year-to-date through the April 30 close vs a roughly 6% gain for the broader S&P 500.
And Jefferies analyst Andy Barish sees an "uphill battle ahead" for Starbucks. The "question facing the company and investors is whether these challenges are more transitory or longer-term issues, i.e. brand, relevance, and competitiveness, especially in China," Barish says. The analyst has a Hold rating on SBUX and lowered his price target to $84 from $91 after the company's appearance on the earnings calendar.
Still, most of Wall Street remains upbeat on the consumer discretionary stock. According to S&P Global Market Intelligence, the consensus analyst target price for SBUX stock is $94.47, representing implied upside of more than 27% to current levels. Additionally, the consensus recommendation is Buy.
Related Content
-
I'm want to give my 3 grandkids $5K each for Christmas.You're comfortably retired and want to give your grandkids a big Christmas check, but their parents are worried they might spend it all. We ask the pros for help.
-
If You're Not Doing Roth Conversions, You Need to Read ThisRoth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us?A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Planner: If You're Not Doing Roth Conversions, You Need to Read This
Roth conversions and other Roth strategies can be complex, but don't dismiss these tax planning tools outright. They could really work for you and your heirs.
-
Could Traditional Retirement Expectations Be Killing Us? A Retirement Psychologist Makes the Case
A retirement psychologist makes the case: A fulfilling retirement begins with a blueprint for living, rather than simply the accumulation of a large nest egg.
-
I'm a Financial Adviser: This Is How You Can Adapt to Social Security UncertaintyRather than letting the unknowns make you anxious, focus on building a flexible income strategy that can adapt to possible future Social Security changes.
-
I'm a Financial Planner for Millionaires: Here's How to Give Your Kids Cash Gifts Without Triggering IRS PaperworkMost people can gift large sums without paying tax or filing a return, especially by structuring gifts across two tax years or splitting gifts with a spouse.
-
'Boomer Candy' Investments Might Seem Sweet, But They Can Have a Sour AftertasteProducts such as index annuities, structured notes and buffered ETFs might seem appealing, but sometimes they can rob you of flexibility and trap your capital.
-
AI Stocks Lead Nasdaq's 398-Point Nosedive: Stock Market TodayThe major stock market indexes do not yet reflect the bullish tendencies of sector rotation and broadening participation.
-
Got $100 to Gamble? These Penny Stocks Could Be Worth the RideVolatile penny stocks are high-risk plays with potentially high rewards. If you have $100 you can afford to lose, these three names are worth a look.
-
Quick Question: Are You Planning for a 20-Year Retirement or a 30-Year Retirement?You probably should be planning for a much longer retirement than you are. To avoid running out of retirement savings, you really need to make a plan.
