Starbucks reports surprise drop in quarterly sales as demand falls

Starbucks on Tuesday reported a surprise drop in second-quarter comparable sales, as it battled weak demand for its coffees in the United States and China, its two biggest markets.

With demand falling across the board, Starbucks reported a fall in same-store sales for the first time in nearly three years, sending its shares down 8 per cent in extended trading.

“In a highly challenged environment, this quarter’s results do not reflect the power of our brand,” chief executive Laxman Narasimhan said.

Demand in the United States decelerated for a second straight quarter as boycott movements impacted traffic at its stores, while a choppy macro environment weighed on demand for its pricier beverages.

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Although the company is working on solidifying its position in the premium coffee market in China, it still grapples with increased competition from mass-market brands, which offer coffee that is easier on the pocket for cautious consumers.

The coffee chain's second-quarter global comparable sales fell 4 per cent, compared with a 1.44 per cent rise expected on average by analysts, according to LSEG data.

Comparable sales in China fell 11 per cent, compared with a 10 per cent jump in the preceding quarter, while in the United States, they fell 3 per cent. – Reuters