On Tuesday, the world's largest coffee chain Starbucks released its third-quarter financial performance report, with earnings per share of 93 cents, meeting expectations. However, revenue fell by 1% year-on-year to $9.11 billion, below the expected $9.24 billion.
More importantly, due to a decline in order numbers, Starbucks' same-store sales in the third quarter dropped by 3%. In the United States, same-store sales fell by 2% for the second consecutive quarter, while in China, same-store sales plummeted by 14%. Following the financial report, Starbucks' stock price rose more than 3% after hours.
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Starbucks stated that the key reason for the decline in same-store sales is weak demand in both domestic and international coffee stores.
Starbucks CEO Laxman Narasimhan said on Tuesday that an increasing number of consumers are choosing to buy their packaged coffee at grocery stores, and the deteriorating consumption environment is dragging down sales at Starbucks stores.
As the second largest market for Starbucks, the average price and number of orders at Starbucks stores in China have both decreased, leading to a 14% decline in same-store sales. Mainly, Starbucks faces fierce competition from local coffee shops like Luckin Coffee in China, which have been undercutting Starbucks on prices.
Narasimhan stated:
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In the U.S. market, we have identified several hundred underperforming U.S. stores and are working to improve their operations. The business in China has always been a pain point for Starbucks, but fortunately, there are signs of daily and weekly sales in the Chinese market gradually rebounding.
</blockquote>
<h2>The backdrop of Starbucks' sales decline: Signs of weakness in the overall U.S. consumer industry</h2>
Starbucks' underperforming financial report is not an isolated case.
So far, quarterly reports from major U.S. chain restaurants have generally disappointed investors.
For example, McDonald's announced on Monday that its second-quarter revenue and profits were below expectations, and McDonald's plans to offer more discounts to increase consumer appeal.
While Domino's Pizza and Chipotle Mexican Grill reported increased quarterly profits in July, both companies have lowered their performance outlook for the year, leading to a decline in stock prices.
Behind the poor performance of these restaurant and consumer giants, to a large extent, it is due to the restraint on consumers' disposable income.
Last Friday, the University of Michigan's Consumer Confidence Index for July fell to 66.4, the lowest since November last year. Analysts pointed out that high prices continue to weaken people's purchasing power, especially for low-income groups.
Lamb Weston, one of the potato suppliers for McDonald's and Chick-fil-A, warned that demand has been declining &#34;accelerated&#34; in recent months and may continue into the next fiscal year.
Not only in the restaurant industry, this wave of consumer weakness has also affected other consumer industries in the United States
Federal Reserve Board member Lisa Cook said last month that stores like Target and Walmart have resumed discount promotions, highlighting that customers are increasingly unwilling to tolerate the recent high inflation.
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Several national retailers have announced plans to lower prices on certain goods, with growing evidence that higher-income shoppers are turning to discount stores.
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Jim Peters, Chief Financial Officer of the appliance giant Whirlpool, said last week that consumer demand is weak, with many consumers preferring to repair refrigerators or washing machines rather than replacing broken products.
Max Gokhman, Senior Vice President of Franklin Templeton Investment Solutions, pointed out that data indicates consumers are starting to slow down, with low-income consumer loans increasing and spending decreasing. This may be good news for Federal Reserve policymakers as they prepare to discuss when to start cutting interest rates at this week's monetary policy meeting. Slowing consumer spending may make it easier for them to achieve the target of maintaining the inflation rate at 2%

SBUX

Starbucks' same-store sales in both the US and Chinese markets have declined. Not only does it have to deal with the impact of weak overall consumer demand in the US, but it also faces fierce competition from local coffee chains like Luckin Coffee in the Chinese market

Global same-store sales fell for the second consecutive quarter, with a 14% decline in China. Starbucks' financial report is lackluster