Starbucks reports drop in comparable sales, earnings as global demand suffers

(Reuters) - Starbucks (NASDAQ:SBUX ) on Wednesday reported a 7% drop in global comparable sales for the fourth quarter as the coffee chain struggles to revive demand for its pricey lattes in the key U.S. and China markets.

Last week, Starbucks reported preliminary fourth-quarter results and suspended its annual forecast through the next fiscal year as new CEO Brian Niccol tries to steer the company toward the path to growth.

The Seattle-based company's strategy to drive demand through promotions and improved loyalty program offers fell flat in the face of muted spending from cost-conscious consumers.

Starbucks is also facing an uphill battle in China, where it is dealing with a choppy macroeconomic recovery and stiff competition from local brands.

Comparable sales in China, the company's second-largest market after the U.S., declined for three straight quarters, falling 14% in the fourth quarter.

Investors, however, are betting on seasoned industry veteran and ex-Chipotle Mexican Grill head Niccol to simplify the company's leadership and operating structure, and reinvigorate the coffee-house culture at Starbucks' U.S. stores.

Shares of the company have risen about 26% since Niccol replaced Laxman Narasimhan as CEO in a surprise announcement in August. They were down about 1% in extended trading on Wednesday.

International comparable sales fell 9% in the fourth quarter, compared with expectations of a 6.5% drop, as per data compiled by LSEG.



Starbucks' loyalty program growth was also tempered in the fourth quarter, with 90-day active members in the U.S. remaining flat sequentially. That compares with a 3% sequential rise reported in the third quarter.

The company's net income fell to $909.3 million, or 80 cents per share, from $1.22 billion, or $1.06 per share, a year earlier in the fourth quarter ended Sept 29.

Source: Investing.com