Dive Brief:
- Starbucks’ comparable North American traffic fell 8% year over year, though increased ticket offset some of the traffic loss, resulting in a 4% same-store sales drop in fiscal Q1 2025, the first full quarter of CEO Brian Niccol’s tenure.
- Despite this downward trend, Niccol said on Starbucks’ earnings call that the company’s turnaround efforts had a positive effect and would stabilize the business.
- Starbucks is working to re-introduce its brand through coffee-forward marketing; Niccol said coffee and espresso sales outperformed expectations, offsetting a disappointing holiday season.
Dive Insight:
Starbucks made a number of changes in Q1 intended to bolster its brand identity and premium marketing position, but these efforts have yet to significantly improve traffic. The brand is “close to doubling” advertising spend, CFO Rachel Ruggeri said on its Q1 2025 earnings call. This change has been financed by a significant reduction in discounting.
Niccol said Starbucks’ shift away from discounting as a traffic driver yielded “40% fewer discounted transactions year-over-year,” and helped offset declining traffic by modestly increasing average ticket.
Brian Yarbrough, a consumer research analyst at Edward Jones, said the chain’s decision to move away from discounting would help it in the long run, despite consumer price sensitivity.
“Starbucks is a premium brand,” Yarbrough said. “Premium brands don't discount, because when you discount, you hook customers on that. It's very hard to get customers away from that discounting.”
Niccol has committed the company to not increase prices and already eliminated extra charges on non-dairy milk, both of which could strengthen the brand’s value proposition without driving consumers away or weakening its premium positioning.
Starbucks is also simplifying its menu, Niccol said — an effort that will result in a “30% reduction in both beverages and food SKUs by the end of fiscal year 2025.” This move could simplify supply chain and operations problems, while reinforcing the brand’s core value proposition.
Investments in the brand’s identity and throughput, Yarbrough said, could result in positive comps in the next couple of quarters, especially once Starbucks begins lapping its difficult quarters from 2024.
Despite the traffic shortfall, Starbucks’ market share among QSRs increased in Q1 after falling for two quarters, Niccol said, indicating that Starbucks is mitigating some of the consumer pullback, at least relative to competitors.
