Starbucks Sees Declining Sales as More Consumers Step Away From High-Priced Coffee

By Danielle Ong

Jul 30 2024, 23:22 PM EDT

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Starbucks' sales tumbled globally as more US and international consumers rejected its high-priced coffees.

Starbucks sales dropped by 3% globally at all stores open for at least a year, according to its recent financial release. In North America alone, the company's sales dropped by 2% for the third quarter. Those drops followed a steep decline recorded for Starbucks last quarter, when the total transactions at North American stores open at least a year fell by 6%.

The coffee giant's revenue fell 1% to $9.1 billion, missing analyst expectations of $9.20 billion. That being said, Starbucks did see its adjusted earnings per share come in slightly higher at $0.93. Estimates only put adjusted earnings per share at $0.92.

CEO Laxman Narasimhan said more shoppers are now buying its packaged coffee at grocery stores, but added that the "challenging consumer environment" is weighing on sales at its cafes. Still, Narasimhan said its three-part action plan "is beginning to work and driving operational improvements that we expect to improve financial performance."

More Consumers Step Away From High-Priced Products

Starbucks' loss of revenue comes as more consumers step away from food chains, restaurants, and stores selling high-priced goods, which were a result of years of price hikes.

It also comes after Starbucks rolled out several promos and new products in hopes of attracting consumers back. New items include popping boba-like pearls and iced energy drinks. The coffee giant also introduced a "pairing menu" that allowed customers to get either a small iced or hot coffee with a butter croissant or breakfast sandwich for $5 or $6.

Starbucks is not the only chain to show a less-than-stellar performance in the quarter. McDonald's reported a drop of at least 1% in the sales of all stores open at least a year in the last quarter. It is the first time the fast food chain reported a sales decline since 2020.

"Beginning last year we warned of a more discriminating consumer, particularly among lower income households - and as this year progressed, those pressures have deepened and broadened," McDonald's CEO Chris Kempczinski said on a conference call with investors, per CNN.

Other chains that reported less foot traffic and lower overall sales in the last quarter include Burger King and Wendy's.