Starbucks on Tuesday reported weaker-than-expected sales in its fiscal second quarter as customer traffic dried up in many key markets.
The Seattle coffee giant said revenue for the January-March period dropped 2% to $8.6 billion. That was far short of analysts’ forecast of $9.1 billion. It was the first time since the end of 2020 that the company saw a drop in quarterly revenue.
Starbucks said its same-store sales – or sales at stores open at least a year – dropped 4%. Wall Street had expected a 1% increase, according to analysts polled by FactSet.
In the U.S., customers spent more per visit, but that wasn’t enough to overcome a 7% decline in transactions. In China, the company’s second-largest market, same-store sales plunged 11%.
Starbucks faced numerous challenges during the quarter, including an ongoing boycott of its stores for its perceived support of Israel in the war in Gaza. Customers in the Middle East and elsewhere began boycotting the brand in the fall after it sued Workers United, the union organizing its workers, over a pro-Palestinian message posted on a union social media account.
Starbucks’ net income dropped 15% to $772 million, or 68 cents per share. Wall Street had expected an 80-cent per share profit.
Starbucks' shares dropped 10% Tuesday in after-hours trading.