Why Starbucks Stock Fell Hard This Week

woman drinking coffee shop hot chocolate cold winter scaled

The coffee giant had some bad news for investors on Tuesday.

Starbucks (SBUX -2.43%) stock trailed the market by a wide margin this week, declining 15% through Thursday trading according to data provided by S&P Global Market Intelligence. That’s as compared to a 1% decline in the S&P 500 in the period. The coffee giant’s shareholders have had a lukewarm 2024 so far, with shares down over 20% even as the market is up 6%.

Starbucks’ stock price slump this week came after the company reported soft fiscal Q2 demand trends.

Dropping sales

Starbucks said in an April 30 update that sales worsened in the most recent quarter, which ran through late March. Comparable-store sales fell 4% globally, marking a sharp turnaround from the prior quarter’s 5% uptick. Investors had been expecting a slowdown, but the scale of that slump caught Wall Street by surprise.

Executives were surprised by the drop, too, which reflected market share losses in a competitive selling environment for consumer discretionary spending. “This quarter’s results do not reflect the power of our brand, our capabilities or the opportunities ahead,” CEO Laxman Narasimhan said in a press release.

Looking ahead

Starbucks’ immediate challenge is to convince its less loyal shoppers to return to its stores, especially in the non-peak afternoon hours. Customer traffic was down 7% in the core U.S. market in Q2, and that figure will need to return to positive territory for the stock to snap out of its funk. The China segment, meanwhile, is facing a different issue of increased price-based competition amid slower consumer spending. That division endured an 11% comps decline due to 8% lower spending and 4% weaker customer traffic.

Executives say they have a plan in place to get the business back on track. Starbucks has navigated through similar downturns in the past, after all, and has recovered with help from innovative product releases and a focus on improving customer satisfaction. The stock likely won’t begin beating the market again, though, until the company’s sales trends have stabilized and are moving back toward growth again.

This article was originally published by a www.fool.com

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