Starbucks missed earnings expectations on Tuesday despite reporting lower profits on declining sales. The coffee giant attributed the earnings failure on declining consumer mood and unimpressive circumstances in China.
Chief Executive Laxman Narasimhan stated that the performance “did not meet our expectations” and attributed the lackluster outcomes to a wave of severe weather that hit the US.
“We continue to feel the impact of a more cautious consumer, particularly with our more occasional customer and a deteriorating economic outlook has weighed on customer traffic and impact sales broadly across the industry,” Narasimhan said on a conference call with analysts.
In the quarter that ended on March 31, profits were $772.4 million, a 15% decrease from the same time the previous year, while revenues dropped 2% to $8.6 billion.
Comparable news in China dropped by 11%, while it fell by 3% in North America.
After a “difficult” quarter, the company has a “comprehensive” plan to correct conditions, according to Chief Financial Officer Rachel Ruggeri.
According to Narasimhan, the company was implementing new technology to provide customers with more information regarding the status of their online orders.
Starbucks has taken note of a large number of cases where consumers begin digital orders and do not follow through with a transaction.
“Here lies opportunity,” said Narasimhan, who aims to improve communication system in particular during the morning rush.
Shares of Starbucks fell about 10 percent in after-hours trading.
