Starbucks Stock Drops as Sales Disappoint and Turnaround Pressures Earnings

Starbucks reported disappointing earnings for its fiscal second quarter on Tuesday, as the coffee giant continues to face declining sales and rising costs tied to its ongoing turnaround strategy.

The company posted adjusted earnings per share of 41 cents, falling short of the expected 49 cents. Revenue also missed forecasts, coming in at $8.76 billion, compared to analysts’ expectations of $8.82 billion.

Net income dropped sharply to $384.2 million, or 34 cents per share, down from $772.4 million, or 68 cents per share, a year ago.

Turnaround Strategy in Focus

CEO Brian Niccol said the company is making progress with its “Back to Starbucks” plan, which focuses on improving store operations and customer service. However, the shift has increased labor costs and reduced profit margins.

“Our financial results don’t yet reflect our progress, but we have real momentum,” Niccol said.

Starbucks is putting more baristas in stores and cutting back on plans to automate drink-making. The company has also paused new equipment rollouts to focus on staffing and service improvements.

Rising Costs, Falling Traffic

Operating margin dropped from 12.8% to 6.9% as Starbucks spent more on labor and restructuring. Same-store sales fell globally for the fifth straight quarter.

• U.S. transactions fell 4%, driving same-store sales down 2%.

• China’s same-store sales were flat, with more transactions but lower average spending.

The company said rising tariffs under President Trump’s trade policy may increase the cost of coffee beans. About 10–15% of Starbucks’ costs come from green coffee, which could affect pricing and profits.

Job Cuts and Cost Reductions

In February, Starbucks cut 1,100 corporate jobs as part of the turnaround. The company also reduced investment in equipment like food warmers and cold brew systems.

“We believe this labor-focused approach has more potential to improve customer experience,” Niccol said.

Looking Ahead

Starbucks plans to improve store interiors, speed up service, and improve its order management system. The goal is to serve all orders in under 4 minutes.

Despite the sales slump, executives remain optimistic about the long-term turnaround.

Shares fell 6.5% in extended trading after the earnings release.