Starbucks has reported its first quarter of comparable sales growth in nearly 18 months, but the results were overshadowed by shrinking margins. The company blamed the Starbucks profit decline on skyrocketing coffee bean costs and economic headwinds in its biggest market, the United States.
CEO Brian Niccol said the coffee giant would be cautious with future price increases and avoid sweeping hikes across its menu. Niccol, who launched the “Back to Starbucks” initiative after taking over in August last year, said this quarter “marks a turn” for U.S. operations.
However, the Starbucks profit decline is expected to persist for at least two more quarters as the company grapples with rising costs of arabica beans. Global coffee prices have surged over 20% this year following a massive 70% jump in 2024. The spike has been fueled by geopolitical tensions, including U.S. President Donald Trump’s 50% tariffs on Brazil — the world’s largest coffee producer — and climate disruptions affecting crops.
These factors, along with higher rent, labor costs, and ongoing store revamps, have squeezed Starbucks’ operating margins. The company’s income margin plunged to 2.9% from 14.4% a year earlier.
While international markets performed better — with same-store sales up 3% — the U.S. business remained stagnant. Comparable sales were flat, and store visits dropped as inflation made consumers cut back on premium coffee purchases.
Industry experts warn the Starbucks profit decline could linger longer than expected. “Their cost structure is tough, and competition is fierce,” said Brian Jacobsen, chief economist at Annex Wealth Management.
The company is expanding its restructuring efforts, closing around 600 underperforming stores and investing over $500 million to strengthen operations. Starbucks will present a new financial outlook at its January investor event.
In China, its second-largest market, Starbucks recorded a modest 2% rise in comparable sales after introducing lower prices and more local offerings. Despite ongoing union disputes in the U.S., Niccol remains optimistic that steady recovery will follow the turbulence — though analysts caution that the turnaround may take more time than Wall Street expects.
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