Starbucks Sours Investor Mood, CEO Brian Niccol Calls Quarterly Results ‘Disappointing’

Things are not brewing well for Starbucks, atleast for its bottom line figures. The company reported weaker-than-expected earnings, which in-turn led to a volatile course for its share price.

Starbucks' net income for the quarter under review stood at $384.2 million, or 34 cents per share. This marks a sharp drop from $772.4 million, or 68 cents per share, recorded in the corresponding quarter last year. In the last month alone, the shares of the company have dropped over 13%, dropping from $98 to $84.85 on Nasdaq.

The company’s operating margin declined to 6.9% from 12.8%, driven by increased spending to revive the brand. Plus, labor costs climbed as Starbucks added more baristas to its US locations.

While the company CEO Brian Niccol admitted that "Q2 results are disappointing," he pointed out that "behind the scenes, we (Starbucks) made a lot of progress and have real momentum with our 'Back to Starbucks' plan."

“Our financial results don’t yet reflect our progress, but we have real momentum with our ‘Back to Starbucks’ plan,” CEO Brian Niccol reportedly said in a video post on the company’s website. “We’re testing and learning at speed and we’re seeing changes in our coffeehouses.”

"My optimism has turned into confidence that our back to Starbucks plan is the right strategy to turn the business around and to unlock opportunities ahead," he added.

Starbucks share price

During the last 6 months, the coffee chain's share price has dropped over 13% from $97 to $84 on Nasdaq. Brian Niccol, who replaced Laxman Narasimhan as the CEO of Starbucks last year, has placed its entire focus on revitalising the core business of the company by focusing on customer experience.

However, the company's sales figures are yet to show any meaningful progress. Same-store sales growth (SSSG) dropped by 1% globally in the quarter under review. This marks the 5th consecutive quarterly decline as transactions declined 2%.

“We believe this evolved, labour-focused approach has more potential to improve throughput and connection while minimizing future capital expenditures on equipment,” Niccol said.