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After missing the mark in Q1 earnings, Starbucks slashes sales guidance

Investors don’t seem too bothered by Starbucks’ recent earnings report, even though the coffee giant had to lower its sales expectations for the full year after falling short of projections in its Q1 earnings. Despite missing targets on both revenue and adjusted earnings per share, Starbucks’ stock saw a more than 4% boost in after-hours trading, suggesting that investors might have been anticipating even worse results.

In terms of numbers, Starbucks’ revenue for the quarter grew by 8% compared to the previous year, reaching $9.4 billion, but this fell short of the expected 10.2% increase. Similarly, the adjusted earnings per share rose by 20% to $0.90, below the anticipated $0.93. The company also saw weaker-than-expected same-store sales growth in the US, with foot traffic up by only 1% and check sizes rising by 4%.

As a result, Starbucks revised its forecast for fiscal 2024 revenue growth down to 7%-10%, compared to the previous range of 10%-12%, with similar adjustments for global and US same-store sales growth. Even China, one of its key markets, saw lower-than-expected same-store sales growth, partly due to increased competition from local coffee brands.

Despite these challenges, Starbucks CEO Laxman Narasimhan remains hopeful, pointing out an increase in foot traffic and record spending by loyal customers. To attract more customers in the US, Starbucks plans to introduce new flavors aimed at Gen Z consumers and special drinks for Valentine’s Day.

However, the company faces tough competition and operational challenges, especially in China, where it aims to expand rapidly. Starbucks has announced cost-saving measures and plans to increase workers’ wages, but its stock performance over the past year has been lackluster compared to some competitors.

Overall, Starbucks remains optimistic about its long-term growth prospects, but it will need to address the current challenges and execute its strategies effectively to regain investor confidence and meet its ambitious expansion goals.

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