Starbucks (SBUX) stock dropped as much as 6.7% Tuesday in after-hours trading as the coffee giant’s second quarter earnings report disappointed Wall Street and cast a shadow over its CEO’s plan to turn around the company.
US comparable store sales — a closely watched metric that includes results from stores open for more than a year — fell for the fifth consecutive quarter, sinking 2% as consumers sought cheaper alternatives at rivals such as Dunkin’ and McDonald’s (MCD). Wall Street analysts had expected a more modest 0.3% decline.
Starbucks’ slumping store sales are a result of fewer customers visiting its stores to buy drinks, though those who still frequent its shops are spending more money. Transactions fell 4% from the prior year, while the average ticket size, or dollar amount spent in each transaction, rose 3% in the US.
Investors also have been focused on the company’s results in China after four consecutive quarters of comparable sales declines as competition heats up in the country.
In China, more customers visited Starbucks, but they spent less money. Comparable sales in China were flat in Starbucks’ fiscal second quarter as a 4% increase in transactions was offset by a 4% decline in ticket size. Analysts had expected same-store China sales to decline by more than 2%.
Other key stats disappointed too. The coffee chain reported adjusted earnings per share of $0.41 for the quarter ending March 30, less than the $0.49 expected from Wall Street analysts, according to Bloomberg data. Its revenue of $8.76 billion fell short of the projected $8.83 billion.
Over the last year, Starbucks stock dropped about 4% compared to the S&P 500’s 8.7% rise.
The company reported an adjusted operating margin — the percentage of revenue left over after operating expenses — of 8.2%, below the 9.5% expected by analysts, per Bloomberg.
The coffee chain’s profit dropped more than 50% from the prior year to $384 million in the March period.
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Starbucks CEO Brian Niccol acknowledged the downbeat results, saying “our Q2 results are disappointing,” but added that “behind the scenes we made a lot of progress and have real momentum with our ‘Back to Starbucks’ plan.”
“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 said.
After joining the company from Chipotle (CMG) last fall with a hefty pay package and controversial benefits, Niccol set into motion a Starbucks turnaround plan given the coffee giant has floundered in recent years, both in the US and abroad.
His plan has included speeding up service and cutting back Starbucks’ menu to focus on core coffee products, as well as winning back customers in China, an increasingly competitive international market.
In January, Starbucks surpassed Wall Street’s relatively low expectations for its fiscal first quarter earnings results. Still, the company reported a decline in same-store sales of 4% during the period on a 6% drop in traffic and 3% increase in the average ticket.
In its first quarter, same-store sales fell 6% in China, an improvement on the 14% drop seen in the country during each of Starbucks’ two previous quarters.
Trump’s tariffs, however, pose significant headwinds for Starbucks going forward. The trade turmoil has dragged down consumer sentiment, pushed inflation expectations to their highest levels since the 1980s, and sparked some anti-American sentiment toward US brands abroad.
Read more: What Trump’s tariffs mean for the economy and your wallet
Some 19% of Starbucks stores are located in China, making it one of Starbucks’ largest markets, and Trump has slapped the country with a 145% “reciprocal” tariff.
Niccol nevertheless struck an upbeat tone about business opportunities in China. “I want to be clear that we remain committed to China for the long term,” he told analysts. “We see great potential for our business there in the years ahead, and remain open to how we achieve that growth.”
Niccol said his team is building “momentum” in the Chinese market with “product innovation,” such as changes to flavors, and “additional marketing” in the country.
A Starbucks sign is seen in the Jing’an district in Shanghai on April 9, 2025. (Photo by Hector RETAMAL / AFP) (Photo by HECTOR RETAMAL/AFP via Getty Images) · HECTOR RETAMAL via Getty Images
As part of Niccol’s turnaround agenda, Starbucks laid off more than 1,000 employees in February and reversed an open-door policy toward noncustomers.
Its unionized workers last week rejected the company’s latest contract offer in the two parties’ ongoing negotiations. Workers at a Starbucks in Buffalo first voted to unionize back in 2021.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at [email protected].
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