Starbucks announced a decline in profits on Tuesday, with broad-based sales drops contributing to a three percent fall in global comparable sales, slightly better than the four percent decline reported in April. Despite the lower profits, shares increased as the company’s turnaround efforts showed signs of progress.
Following a tough April earnings report that rattled Wall Street, Chief Executive Laxman Narasimhan committed to a company reset. Narasimhan highlighted improvements in training, employee management, and technological advancements that are beginning to yield results.
Narasimhan stated in an AFP report that operational indicators are improving ahead of financial outcomes, emphasizing efforts to rebuild the brand and strengthen store and supply chain foundations. He acknowledged the challenges posed by weakening consumer sentiment and difficult market conditions in China but stressed a sharper focus on operations to enhance customer order fulfillment during peak hours.
The disappointing April results prompted public remarks from Howard Schultz, the company’s former CEO, whom Narasimhan succeeded in April 2023. Starbucks also faces pressure from activist fund Elliott Investment Management, which has taken a stake in the company and is advocating for measures to boost its share price.
Narasimhan confirmed ongoing constructive conversations with Elliott, signaling positive engagement. As a result, Starbucks shares saw a 5.1 percent rise in after-hours trading.