Starbucks’ (SBUX) is striving to brew up a comeback.
The Seattle-based coffee giant is expected to post its first quarter fiscal year 2025 results on Tuesday after market close. This will be the first full quarter under CEO Brian Niccol, who took the helm on Sept. 9.
Wall Street expects revenue to come in at $9.32 billion, compared to $9.43 billion from the year ago quarter. Same-store sales and foot traffic are projected to decline 5.30% and 7.28%, respectively, year over year.
Analysts expect a slight improvement in foot traffic from a quarter ago, offset by lower ticket growth.
Bank of America analyst Sara Senatore, who has a Buy rating on Starbucks, told Yahoo Finance the US performance will be a key indicator for the overall business.
“If the US starts working again, it becomes very, very hard to make any kind of structural argument that the Starbucks brand isn’t good,” she said. Wall Street expects US same-store sales to drop 4.06%, compared to the 6% decline last quarter.
Citi analyst Jon Tower said there is “an opportunity to turn the brand around.” But the time, cost, and the slow trajectory of its same store sales, store count, and earnings growth compared to prior years, “may prove less appealing to investors than what’s currently implied by shares.”
In the past year, Starbucks stock has gained 5%, far lagging S&P 500’s (^GSPC) 24% rise. But the shares have spiked 32% in the past six month, after Niccol was announced as the new CEO in August.
Here’s what Wall Street expects, per Bloomberg consensus estimates, compared to the first quarter of fiscal 2024:
Revenue: $9.32 billion versus $9.43 billion
Adjusted earnings per share: $0.66 versus $0.75
Same-store sales: -5.30% versus +5.00%
Foot traffic: -7.28% versus +2.0%
Ticket Growth: 1.87% versus 3.00%
The cost of coffee has been soaring — coffee futures (KC=F) are up 80% in the last year — but analysts say the risk to Starbuck’s margins should be limited. Bank of America estimates coffee makes up about 22% of Starbucks’ cost of goods, and not all of it is the green coffee beans themselves. Niccol likely won’t change his promise to pause price increases, given the company hedges against commodity fluctuations with fixed price contracts.
As part of Niccol’s “Back to Starbucks” plan, which calls for a return to focus on coffee, better pricing, and faster service, the company has announced a number of changes.
They include getting rid of extra charges for non-dairy milk at the North American locations it owns, and reintroducing personal touches like coffee in ceramic mugs.
Earlier this month, it announced the implementation of a Coffeehouse code of conduct, where only paying customers can sit in-store and use the restroom. It also said corporate layoffs to “operate more efficiently “will be announced by early March.
Senatore said general and administrative expenses were too high. As of the recent quarter, they made up 7.1% of total net revenue.
For earnings, Senatore will be looking for “more specifics on the kinds of investments they need to make, the quantity… magnitude of the investment, but also some of the places where maybe they can find sources to reinvest,” she said.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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