Starbucks cuts sales forecast and misses market expectations amid boycotts

SEATTLE, February 3, 2024 — Starbucks, the global coffee giant, has revised down its yearly sales forecasts and fallen short of market expectations, primarily due to boycotts in the US and the Middle East. The company disclosed the challenges during a post-quarterly earnings conference call on Tuesday night.

Middle East Impact Amid Israel-Hamas Conflict

Starbucks cited a "significant impact on traffic and sales" in the Middle East, attributing it to the Israel-Hamas conflict. CEO Laxman Narasimhan explained that the situation led to a decline in customer visits and sales in the region.

US Boycotts and Legal Disputes

Boycotts also affected Starbucks in the US, where consumers avoided the chain following legal actions against Workers United in October. The legal dispute involved the use of Starbucks's name and a similar logo. CEO Narasimhan acknowledged the impact of boycotts on US store traffic and expressed concern over protesters influenced by misrepresentation on social media.

Financial Performance Below Expectations

Starbucks' results for the first three months of the 2024 fiscal year fell below analysts' forecasts. Despite reporting record revenue of $9.43 billion in the first quarter, the company lowered its sales outlook for the year due to weakened spending in China and other markets.

Revised Growth Outlook

Originally forecasted to increase between 10% and 12%, revenue growth for the rest of the year is now expected to be in the range of 7% to 10%. Similarly, Starbucks anticipates that sales at global outlets open for at least a year will not rise to the previously expected level.

Investor Response

Following the announcement, Starbucks shares saw a 3% increase, possibly reflecting relief among investors who had anticipated a worse financial performance. However, compared to a year ago, the shares remain 11% lower.

Industry-wide Impact

Starbucks is not alone in facing customer backlash related to Middle East issues. Other brands, including McDonald's, have attributed similar challenges to "misinformation" on social media. Additionally, a boycott of Bud Light, produced by AB InBev, resulted in a significant drop in US sales.

While Starbucks navigates these challenges, the company's leadership expressed sympathy for those affected by the conflict in the Middle East and affirmed its commitment to addressing the impact on its operations.