Yahoo Finance Starbucks Corp (SBUX) Q2 2024 Earnings Call Transcript Highlights: Navigating Economic ...
Total Company Revenue: $8.6 billion, down 1% year-over-year.
Global Comparable Store Sales: Declined 4% year-over-year.
North America Comparable Store Sales: Negative 3% comp growth.
China Comparable Store Sales: Negative 11% comp growth.
Global Operating Margins: Contracted by 140 basis points to 12.8%.
Earnings Per Share (EPS): Declined by 7% to $0.68.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you clarify the impact of weather on recent trends, and how does the successful launch of lavender late in the quarter align with unchanged exit rates? A: Laxman Narasimhan, CEO & Director of Starbucks, explained that despite transitory headwinds like weather, the underlying challenge is with the occasional customer due to economic pressures. The strong performance of loyal customers within the Starbucks Rewards and app shows robust business, but the challenge lies in reaching and providing value to more occasional customers. The focus is on meeting existing demand, launching new products, and enhancing value for occasional customers.
Q: Is there a brand resonance issue with younger or more occasional customers? A: Laxman Narasimhan noted that overall brand equity remains strong, but occasional customers are facing economic pressures that affect their spending choices. Starbucks is focusing on connecting with these customers through variety, value, and the Starbucks app to enhance their visibility of the brand's value.
Q: How do you justify the continued rapid store expansion given the current challenges, particularly in China? A: Laxman Narasimhan and Rachel Ruggeri, EVP & CFO, highlighted that despite current challenges, the returns on new stores, especially in lower-tier cities and new counties in China, are very attractive. The deliberate decision to expand in these areas is based on strong cash returns and significant market potential, supporting confidence in continued growth.
Q: Could you elaborate on the competitive environment in China and how it's impacting Starbucks? A: Narasimhan described the competition in China, particularly in the mass market segment, as intense, with many competitors focusing on price. Starbucks is maintaining its premium positioning and focusing on its competitive advantages, including its comprehensive supply chain and store experience. Despite short-term challenges, the long-term potential in China remains significant due to low coffee consumption per capita compared to other markets.
Q: How is Starbucks' beverage innovation pipeline evolving, and what are the plans for R&D? A: Narasimhan outlined that Starbucks is focusing on platforms like textures, handcrafted energy, and plant-based options to drive innovation. These platforms are designed to introduce systematic innovations that cater to customer demands for variety and health-conscious options, reflecting a strategic shift in R&D to more frequent and relevant product launches.
Q: What is the strategy behind the Siren System, and how does it fit into addressing current operational challenges? A: Narasimhan clarified that the Siren System rollout is on track and is complemented by process improvements aimed at reducing wait times and enhancing operational efficiency within stores. This system is part of a broader strategy to improve customer service and operational throughput, particularly during peak times.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
