Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) announced what seemed to be a mediocre quarter. Because it was better than recent poor ones, the stock rallied but then sold off. It turns out that it was not a good quarter at all. Compared to its growth years, there was no story for new CEO Brian Niccol to tell.
Same-store sales did not fall, but they did not rise. Since they dropped in the same quarter a year ago, being flat was like being down. Niccol said he would begin his tenure working on results in the United States. While global same-store sales were up 1%, U.S. same-store sales were flat.
Earnings were ugly, dropping from $0.80 to $0.12 per share. Revenue rose 5% to $9.57 billion. The earnings report briefly mentions that Starbucks closed 627 stores, 90% of which were in North America. The global total hit 40,990.
The major reason the figures were disappointing is that Niccol had done so much to improve them. He made U.S. uniforms uniform. He cut white-collar workers. He reduced the number of menu items to increase the speed of customer service (though there is no firm evidence it worked). He has started to redesign some stores. He has even promoted the company on television, as if there are people in the U.S. who have not heard of it.
Niccol said, “We’re a year into our ‘Back to Starbucks’ strategy, and it’s clear that our turnaround is taking hold.” Flat U.S. comparable sales are not a turnaround. They are a tiny bit better than a decline.
One sign that Niccol has not had any success is the stock price. Over the past year, it is down 14% while the broader market is up 18%.
Niccol has not been able to sell his vision. He lacks the results to do so.
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