Starbucks Stock Rises On Q1 Earnings Beat, CEO’s Turnaround Strategy: Retail’s Not Convinced

synopsis

Shares of Starbucks rose 0.40% in after-hours trading on Tuesday after surging 5% earlier in the day after posting better-than-expected first-quarter earnings, but retail sentiment turned sour.

The coffee giant reported earnings per share of $0.69, beating consensus estimates of $0.67, according to Fly.com

Its first-quarter revenue stood at $9.4 billion, against consensus estimates of $9.31 billion. Consolidated net revenues of $9.4 billion were flat compared to prior year, including on a constant currency basis.

U.S. same-store sales fell 4% due to an 8% decline in comparable transactions. While international comparable store sales declined 4%, driven by a 2% decline in average ticket and comparable transactions, according to the company.

Starbucks’ management said it has made progress on its strategic overhaul termed “back to Starbucks” under its CEO Brian Niccol, who joined the company from Chipotle Mexican Grill last year. Niccol is reportedly reorganizing leadership at Starbucks hiring certain former executives of Taco Bell.

“We’re just one quarter into our turnaround, but we’re acting quickly on the ‘Back to Starbucks’ plan and seeing a positive response,” CEO Brian Niccol said in a statement. “This shift in strategy is key to addressing our core issues, rebuilding brand confidence, and driving long-term growth.

Sentiment on Stocktwits suggested investors are skeptical about the turnaround efforts so far, with sentiment declining to ‘extremely bearish’ from ‘bullish.’ Message volumes, meanwhile, continued to be in the ‘extremely high’ zones.

On operating income front, Q1 figures decreased to $1.2 billion compared to $1.5 billion in the same period last year, with operating margin of 16.7% contracting from 21.4% in the prior year. The decline in margin was driven by deleverage and investments in support of ‘Back to Starbucks,’ the company said.

Starbucks announced a cash dividend of $0.61 per share, payable on February 28, 2025, to shareholders of record on February 14, 2025.

The coffee chain opened 377 net new stores in the first quarter, with 40,576 stores at the end of the quarter. About 53% of its stores are company-operated, and 47% are licensed.

Starbucks stock is up 10% year-to-date.

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Editor's Note: Brian Niccol joined Starbucks last year from Chipotle Mexican Grill, not Taco Bell. A previous version misstated his most recent employer. <