- Starbucks’ traffic in November and its quarterly sales among occasional consumer were weaker than anticipated, according to the chain’s Q1 FY 2024 earnings call.
- Traffic dips were especially acute in the afternoon daypart, CEO Laxman Narasimhan said. While visits rebounded somewhat with the holidays, the chain’s performance remained “softer than planned” in January, CFO Rachel Ruggeri said.
- Starbucks is developing three new beverage platforms that are “laser targeted” to the afternoon daypart and occasional customers to improve traffic, Chief Marketing Officer Brady Brewer said on the call.
While sales with occasional customers weakened, Starbucks’ loyalty members increased their spend and frequency. This boosted U.S. comps 5%, driven by 4% ticket growth and 1% average transaction growth in the quarter, according to the earnings call. The chain broadly missed analyst predictions, according to a William Blair analysis sent to Restaurant Dive, but William Blair and other analyst firms, like BTIG, still view Starbucks as a strong brand.
Part of that strength lies in the chain’s menu innovation.
“We're going to have three new beverage platforms coming in the next six months,” Narasimhan said on the earnings call.
Brewer said the new beverages have been tested to ensure they fit into it operations and hinted that it may retire some underperforming products to maintain the system’s current level of complexity. The chain has added a variety of drinks in recent months, ranging from four holiday-themed cold foam flavors to its Oleato beverage platform. The Oleato line of drinks went national this week after months of availability in select markets. Widespread availability of this blend of olive oil and coffee could drive traffic and trial in the second quarter.
Competition for the afternoon snacking market is heating up, with McDonald’s testing a new brand, CosMc’s, aimed squarely at the afternoon snack and beverage occasion. Continued visit slumps during that daypart could leave Starbucks more vulnerable to competitors.