By Vitta Minn

Remember when a cup of coffee and a slice didn’t do too much damage to your pocket?

Well in this Frappuccino and latte age, you can expect to pay around US$20 for a coffee and a sandwich or muffin at Starbucks which has 17, 000 stores in North America and 39,000 globally. 

A few years ago, Starbucks was all the rage, those tall cups were like a fashion item.

Today, Starbucks Corp. stocks are experiencing the worst post-earnings drop since 2000 after disappointing Q2 earnings.

GAAP earnings per share of US$0.68 declined by 14 per cent over the prior year. Transactions during  Q2 in the US were down seven per cent and globally down six per cent. There was a significant decline in China, Strarbucks’ second largest market, of 11 per cent.

Reported revenue has dropped to US$8.56 billion. Year to date, its share price has fallen by 19 per cent.For fiscal year 2024, Starbucks now expects revenue growth of around six per cent, down from an estimated 10 per cent. It had expected earnings to climb to 20 per cent for fiscal year 2024 but that is likely to come in at around five per cent.

“In a highly challenged environment,  this quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead. It did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us.“In this environment, many customers have been more exacting about where and how they choose to spend their money, “ said Sarbucks’ CEO Laxman Narasimhan.

Starbucks opened 364 net new stores in Q2, ending the period with 38,951 stores. It has had to fight off low-price competition and both McDonald’s and Tim Hortons are taking market share.  It’s difficult to justify spending US$8 on a pumpkin latte at Starbucks when the high inflation and interest rate regime stubbornly persist.

Starbucks has to figure out a way to drive incremental traffic to its stores. This fall in sales for the first time in three years comes when people are minding their pockets as prices continue to climb.

One can wait for up to 20 minutes at Starbucks as baristas concoct fancy coffees. In this fast digital age with short attention spans, people don’t have the patience and simply head for the door. Speed of service is vital.

Narasimhan is now focusing on energy drinks and other food and beverages and extending the product line. He must not forget his company’s core business.

At the end of the day, most customers walk into a Starbucks to purchase a coffee.

Former CEO of Starbucks, Howard Schultz, commented: “ At any company that misses badly, there must be contrition and renewed focus and discipline on the core. Own the shortcoming without the slightest semblance of an excuse. I have emphasised that the company’s fix needs to begin at home: U.S. operations are the primary reason for the company’s fall from grace . The stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in stores.”“The go-to-market strategy needs to be overhauled and elevated with coffee-forward innovation.”