Starbucks Earnings Top Expectation, Amidst Declining in Sales

Earnings Overview
Starbucks reported fiscal first-quarter results that topped analysts’ expectations, despite sales and profit declines year-over-year. The results came as new CEO Brian Niccol said the company made progress toward its "Back to Starbucks" strategy.

Starbucks did not provide an outlook for 2025, but CFO Rachel Ruggeri warned earnings pressure could "intensify" in the 2nd quarter, before improving in the back half of 2025.
Starbucks (SBUX) reported fiscal first-quarter results that topped analysts’ expectations, despite sales and profit declines.1

The coffee giant saw net sales fall 0.3% year-over-year to $9.4 billion, above the analyst consensus compiled by Visible Alpha. Earnings of $780.8 million, or 69 cents per share, declined from $1.02 billion, or 90 cents per share, a year earlier but topped Wall Street expectations. Global same-store sales fell 4%, a narrower decline than the 5% drop expected by analysts.

Better-Than-Expected Results Come Under New CEO's Turnaround Plan
new CEO Brian Niccol said in a release:
“While we’re only one quarter into our turnaround, we’re moving quickly to act on the 'Back to Starbucks' efforts and we’ve seen a positive response,” .

Niccol, who took the mantle of power in September, has implemented a turnaround strategy known as “Back to Starbucks,” which has included the reinstatement of a policy requiring customers to make a purchase if they want to spend time in the company’s cafes or use its bathrooms.

His new initiative also includes a roughly 30% reduction in menu items to help cut down on order times, Niccol said on the company’s earnings call. Niccol said Starbucks plans to develop a time slot model that will allow customers to schedule mobile orders, as well as adding shelving to separate mobile orders from in-store ones.

Starbucks aims to expand its presence with more stores too, after adding 377 net new stores in the first quarter. Niccol further stated
"Starbucks could even double its store count in the U.S. in the next couple years, which stood at 17,049 as of Dec. 29."

CFO Warns of Earnings Could Be Pressured in Q2
In what came as a shocker, Starbucks did not provide an outlook for 2025, after saying last fall that it wanted to “complete an assessment of the business” under Niccol, before issuing guidance.

However, CFO Rachel Ruggeri said on the company's earnings call Starbucks expects YoY earnings pressure could "intensify" in the second quarter, before improving in the back half of 2025.

China Challenges Persist Amid Competitive Pricing
In China, Starbucks’ second-largest market, same-store sales fell 6%, with a 4% decline in average ticket prices. The company has leaned on discounts to compete with lower-priced rivals like Luckin Coffee. Despite these measures, traffic remains a challenge in the region, contributing to the ongoing decline in sales performance.


Technical Outlook
Shares of Starbucks were little changed and slightly higher in extended trading Tuesday following the company's earnings call. They were up 10% for the year so far through Tuesday's close. For traders, Starbucks’ stock is showing resilience, with shares up 30% since Niccol’s appointment last year. While the long-term success of the turnaround plan is uncertain, the current momentum suggests a cautiously optimistic outlook for the stock.

as of the of time of writing, shares of Starbucks (SBUX) is trading with a moderate level in premarket trading up 0.38%. there's a bit of a concern largely due to the fact that the stock is overbought with the relative strength index at 70.75. Also adding to the peril, is the gap-up pattern exhibited by SBUX on the 12th of August, 2024 this gap up pattern wasn't filled up.
while seen as a bullish pattern, gaps are historically known to be filled up either up or down.

In the case of a cool off, immediate support lies in the 38.2% Fibonacci retracement level a break below that pivot could resort to the fill down of the gap up pattern formed last year.