June 22, 2024

Starbucks went public in 1992. At the time, it had just 165 cafes.

Starbucks went public in 1992. At the time, it had just 165 cafes.
Image: Future Publishing (Getty Images)

Starbucks is having a tough time reaching consumers all over the world. In the U.S., its supply isn’t meeting demand, and in China, it’s ambitious expansion plans are lagging.

Shares of the coffee maker plummeted after it reported lower-than-expected second-quarter earnings earlier this week. That decline was largely due to sales decreasing in the U.S. and China, which prompted shares to fall to its worst post-earnings level since 2000.

The stumble is not in line with the company’s ‘triple shot strategy’ unveiled last November. While failing to attract customers, Starbucks’ CEO Laxman Narasimhan said during the company’s earnings call on Tuesday that the strategy is delivering “efficiencies in the face of headwinds.”

“In this environment, many customers have been more exacting about where and how they choose to spend their money,” said Narasimhan.

But many U.S. and Chinese Starbucks customers have been holding off on spending at the coffee chain. In the U.S., sales declined by 3%, while sales in China, its second biggest market, fell even further, by 11% during the second quarter.

Starbucks chalked up the decline in the U.S. to product unavailability and long wait times on its app, noting that customers would log an order but not complete it.

Meanwhile, it said competition in China was the culprit of its sales miss. In 2022, the company said it would open one new store every nine hours over the next three years in China. But plans have lagged behind the country’s domestic coffee giant Luckin Coffee, which has over 16,000 digital-first locations.

For the fiscal 2024 year, Starbucks slashed its earnings and revenue forecast. The coffee giant said it expects that its stores would continue to underperform for several quarters.

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