Starbucks’ turnaround plans in focus during Q4 results

Starbucks (NASDAQ:SBUX) is set to report fourth quarter results on Wednesday, days after the coffee giant suspended its forecast through the next fiscal year due to weak demand for its handcrafted beverages.

Wall Street expects the Seattle-based company to post EPS of $0.89, implying a fall of 16%, while revenue is expected to rise 2.5% to $9.14 billion during the quarter.

Starbucks also issued preliminary Q4 results and said global comparable store sales, revenue and profit declined, driven by softness in sales in U.S. and China. The company said intense competition and a soft macro environment weighed on consumer spending.

Analysts believes that details on Starbucks’ turnaround strategy to improve results will take center stage during the quarter.

“While well below FQ4 guidance and consensus expectations, investors have largely shrugged off the negative preannouncement and suspended FY25 guidance, choosing to look forward to new CEO Niccol’s articulation of a longer -term turnaround strategy,” said Wedbush analyst Nick Setyan and lowered FY25 U.S. same-store sales growth estimate to 1.3% from 2%.

Analysts from Deutsche Bank sees this as an opportunity for Starbucks to orient the focus to the long-term story.

The company’s change in top leadership roles along with operational challenges, including union issues, jolted investors’ confidence. The stock gained just over 1% so far this year, compared to the 22% rise in the broader S&P500 Index.

However, Starbucks’ newly appointed top boss Brian Niccol said the company’s problems are very fixable and that it needs to “fundamentally change” its strategy, giving investors hope that the improvements under the new leadership will ultimately prop up sales.

Niccol added that he would share more details during the fourth quarter earnings call.

Over the last two years, the company has beaten EPS estimates 50% of the time and has beaten revenue estimates 38% of the time.

Seeking Alpha analyst and Seeking Alpha’s Quant ratings are cautious and rated the stock a Hold, while Wall Street analysts consider it a Buy.

Over the last three months, EPS and revenue estimates have seen no upward revisions, compared to 21 and 15 downward moves.