Starbucks said sales grew for the first time in about two years, but acknowledged the coffee chain's turnaround could take years as it closes locations and lays off hundreds of corporate employees.
The Seattle-based company reported $9.6 billion in revenue in its fiscal fourth quarter, up 5% from the year-earlier period, as global store sales edged up 1%, lifted by growth in international markets. U.S. sales were flat year over year, an improvement over the 6% decline reported in the year-earlier period.
Starbucks Chief Financial Officer Cathy Smith cautioned that while executives are pleased with the progress to date, the chain faces "a multi-year turnaround” as it closes North American stores and lays off more than 900 workers in its comeback attempt.
"Turnarounds are difficult to forecast," Smith told analysts. "While we have good reason to believe that our U.S. company-operated stores should build through the year, we also know that recoveries are not always linear."
The company said it closed 627 unprofitable or under-performing stores during the quarter, with 90% of them in North America.
Starbucks has estimated it will incur about $1 billion in costs related to the cafe closings severance payments and other restructuring activities.
CEO Brian Niccol, who marked his first year with the company last month, said Starbucks needs to invest more in the chain’s cafes by boosting staffing, investing in training and upgrading locations.
The chain is working to increase sales by improving customer order sorting and sequencing and making coffeehouses "more warm, welcoming, and connected to their communities," Niccol added.
More store renovations
As of the most recent quarter, Starbucks completed nearly 70 store renovations that the chain calls "uplifts," mainly across New York and Southern California, Niccol said.
The company aims to complete more than 1,000 of the uplifts by the end of the coming fiscal year.
Niccol called the most recent period a “turning point” as store sales returned to growth mode for the first time since late 2023. Starbucks posted a $133.1 million profit in the most recent quarter, down 85% from $909.6 million in the previous year’s quarter.
The coffee chain looks to return to sales and store growth in the coming year, despite such challenges as tariff-induced increases in coffee prices.
Budget-conscious consumers are spending less on coffee shop visits, and Starbucks faces competition from such rivals as Dutch Bros., 7Brew and Luckin Coffee.
The company's unionized employees are also in the process of voting on whether to authorize a strike as they seek better pay and working conditions.