For decades, Starbucks has been one of the most popular coffee shops on the planet, especially in the United States. But Starbucks isn’t doing nearly as well as it once was.
Starbucks had a catastrophic Q1 in 2024; even though there are several reasons why profits are down, shareholders are far from pleased, and Starbucks desperately needs to generate revenue to save its stock this year.
Starbucks 2024 Revenue and Stock Pricing
Financial experts on Wall Street forecasted an overall revenue of $9.12 billion from January to March 2024 for the coffee giant, but they fell short at only $8.56 billion. According to FactSet, this is the first time the company saw a decrease in quarterly revenue since the COVID-19 pandemic.
When the quarterly numbers came in on April 30, 2024, Starbucks’ stock price dropped immediately from more than $87.6 to about $75, and today, May 2, 2024, it’s down again to $73.8.
Starbucks Is Obviously Disappointed with Its Earnings
Starbucks CEO Laxman Narasimhan said during an investor meeting this week, “Our performance this quarter was disappointing and did not meet our expectations.” Those expectations were that their revenue would grow by 1% when instead, it fell by 4%.
But the big question on everyone’s mind is why Starbucks, which historically has increased its profits every quarter, did so poorly these last few months.
Americans Are Cutting Back on Spending
One of the main reasons why Starbucks is struggling to increase its profits actually has nothing to do with the company: Americans are simply cutting back on superfluous spending. And since the majority of Americans can make a coffee at home, purchasing one on the way to work is often one of the first expenses to go.
Now, more than ever, Americans are struggling to make ends meet. With a high national inflation and increasing costs of both housing and living, many Americans are sticking to a tight budget.
Starbucks Reported Disappointing Sales in China
But Starbucks isn’t just seeing unimpressive sales in the United States; the company also reported low earnings in China, where it has 6,804 stores.
While globally, Starbucks experienced a 7% decline in transactions, they saw a whopping 11% decrease in China alone. Sales in China are exceptionally important as it is the company’s second-largest market.
The Starbucks Union Protests Undoubtedly Affected Their Sales
In November 2023, thousands of Starbucks employees took to the streets to protest the company’s lackluster workplace policies. Many of these employees held signs for Starbucks Workers United, an organization that demands properly staffed stores and reasonable hours.
At the time, Starbucks claimed that the protests would not affect their sales as the few thousand employees on strike were just a small percentage of their workforce. However, that’s not exactly what happened.
Many Americans Boycotted Starbucks in Support of Israel
During the kerfuffle of the union protests, the Starbucks Workers United released a pro-Hamas post on social media just two days after Israel was attacked by Hamas terrorists. The post led to millions of people boycotting the coffee chain in support of Israel, as well as peaceful residents of Palestine.
The post has since been removed, and Starbucks is suing the Workers United for releasing the political post in their name. Starbucks has even donated $3 million to the World Central Kitchen in Gaza, but the damage was already done.
Prices Have Increased Significantly at Starbucks
There’s no question that many Americans and customers around the world have stopped purchasing Starbucks or at least cut back because prices have significantly increased this year.
Starbucks prices vary between countries and even specific locations. On average, a small (or “tall,” as they say at Starbucks) latte or cappuccino ranges from $3.75 to $4.25, and the large or “venti” options are well over $6. Many Americans agree that these prices simply aren’t worth it anymore.
Starbucks Discounts Will Be Available on the App
Starbucks can’t do a whole lot to combat some of these issues, such as the political frustrations and the nation’s inflation. However, they do have several plans in the works to improve overall sales.
For those who complain Starbucks drinks are too expensive, the company plans to release extensive discounts and deals on its rewards app this year. CEO Narasimhan said that, for the first time, the discounts will be available to non-rewards customers as well.
Starbucks Plans to Upgrade Their Menu This Year
Additionally, Starbucks has plans to upgrade its menu with several big changes. First, they will be offering a homemade energy drink for the first time.
Second, it will have an entirely new sugar-free customization menu by the end of the year for its health-conscious customers. Company executives hope that these two specialty offerings will increase sales significantly in the coming quarters.
Starbucks Is Still Wildly Successful
It’s important to note that Starbucks is still considered a wildly successful company by financial experts and customers alike. As of May 1, 2024, the company is still worth $84.28 billion.
However, as the company saw a 32.93% decrease in worth in just one year, Starbucks absolutely needs to turn things around if it wants to remain successful over the next decade.
What’s Next for Starbucks?
Offering discounts for all customers, members or none, on the Starbucks Rewards App and promoting new, exciting, and healthier menu options are both great steps in the right direction. But they may not be enough.
Starbucks, as well as its investors, will have to wait and see if this downward trend continues throughout the next three quarters of the year. If it does, much bigger changes may need to be made.
