On Tuesday (Oct. 22), Starbucks delivered a less-than-stellar earnings report.

According to officially disclosed preliminary earnings figures, Starbucks' consolidated net income fell 3% year-over-year to $9.1 billion for its fiscal fourth quarter ended Sept. 29, below Wall Street's estimate of $9.4 billion. Earnings per share came in at $0.80, down 25% from the previous year and also below analysts' forecasts of $1.03 per share.

In the fiscal fourth quarter, Starbucks' global same-store sales fell 7 percent, the third consecutive quarterly decline and the company's biggest quarterly drop in four years. Within that, U.S. same-store sales were down 6% and comparable transactions were down 10%, but the good news was that average ticket prices were up 4%. Starbucks said the lower-than-expected results were due to the limited effect of the company's initiatives such as expanding its product range and frequent promotions. In addition, Starbucks also saw a sharp decline in same-store sales in China, down 14% year-on-year, with average ticket prices down 8% and comparable transactions down 6%, due to factors such as increased competition and weak consumption.

For the entire fiscal year 2024, Starbucks' global same-store sales declined 2% year-over-year, consolidated net income increased 1% year-over-year to $36.2 billion, and GAAP earnings per share declined 8% year-over-year to $3.31. In response to the lower-than-expected full-year results, Starbucks cited a significant decline in customer traffic, the company's targeted and accelerated investments that failed to improve customer behavior, and the macro and competitive environment in China that further pressured its performance.

“Despite our increased investments, we were unable to change the trajectory of declining customer traffic, resulting in pressure on both our revenue and profit. While our efficiency efforts continue to be on track, they have not been sufficient to offset the impact of declining patronage,” commented Rachel Ruggeri, Chief Financial Officer, ”We are working on a plan to turn the business around, but this will take time. We want to increase confidence in the business and provide some certainty as we drive the turnaround.”

In addition to the poor results, Starbucks also brought bad news that it will suspend giving guidance for the entire fiscal year 2025 in light of the transition of the company's CEO and the current state of the business.

Starbucks shares plummeted after the earnings release. The company's shares were down 9% at one point in after-hours trading before narrowing to about 4%. So far this year, the stock is up less than 1%, while the S&P 500 is up 23% over the same period.

Starbucks' current CEO, Brian Niccol, took over just two months ago, and his top priority is to stem the company's sales decline.

Niccol was the first to take aim at the company's struggling U.S. business. In an open letter released during his first week on the job, Niccol said he wanted to innovate the menu, improve the barista experience, and speed up morning service, among other things. However, the results from the fiscal fourth quarter were not very impressive.

Edward Jones analyst Brian Yarbrough, Starbucks, “this transformation will take longer than some investors expect,” which will lead to Starbucks in the next few quarters to become “very difficult”.

Niccol has also aggressively reorganized the company's executive ranks since taking over. Last week, Starbucks announced that former Chipotle executive Tressie Lieberman would be joining Starbucks as its newly created global chief brand officer. Last month, Starbucks announced the “retirement” of its North American CEO, Michael Conway, who was appointed by former CEO Laxman Narasimhan and had been on the job for only five months.

William Blair analyst Sharon Zackfia said, “While we remain optimistic that Starbucks will return to positive comparable sales in fiscal 2025 under Niccol's leadership, we believe a reality check is needed on the timeline for revitalizing profitability.” Zackfia noted that Niccol could take a variety of aggressive tactics, including increasing labor hours in stores and reducing the frequency of limited-time promotions.

In the earnings report, Niccol said that company executives will share more details about Starbucks' measures to turn around the business during the company's Oct. 30 earnings call.