Consumers have reached their breaking point with $6 iced coffees and lemonades at Starbucks.
Starbucks sales dropped 3% globally at stores open for at least a year, including a 2% drop in its home North America market. And that masked how steep the decline was for Starbucks last quarter: Total transactions at North American stores open at least a year fell 6% in the quarter. That was offset, in part, by higher prices.
In other words: Fewer people are going to Starbucks and buying drinks and food. It was Starbucks’ second-straight quarter of sales declines.
Starbucks’ struggles reflect consumer fatigue with high prices at food chains, restaurants and stores after years of price hikes. Consumers are showing their limits at Starbucks and other chains like McDonald’s. McDonald’s this week reported that sales at stores open at least a year fell 1% last quarter, its first sales decline since 2020.
Starbucks also faces increased pressure from rival drive-thru coffee chains – and from people opting to make their morning cup of coffee at home. Prices surged over the past few years, but this year, grocery store costs have moderated, while the cost of eating away from home continued to rise.
“Your more cost-conscious consumer, they’re finding other places or just doing things at home. There’s also more competition from some of the drive-thru coffee chains, like a Dutch Bros,” said RJ Hottovy, an analyst at Placer.ai.
Starbucks, using a play from fast food chains, is trying to win back customers with value menus. The chain recently rolled out a new “Pairings Menu,” which combines a drink and a breakfast item for either $5 or $6.
Shares of Starbucks (SBUX) rose more than 2% in afterhours trading. Starbucks’ stock has dropped 19% this year.
This is a developing story. It will be updated.
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