Starbucks Earning, Tesla’s Supercharger Conundrum, and More
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Starbucks Reports Q2 Earnings Miss
This week, Starbucks (NSDQ: SBUX) reported quarterly earnings that suggested cash-strapped consumers are pulling back on their consumption of coffee beverages.
The coffee chain reported a 4% drop in same-store sales, while traffic to its locations decreased by 6%. According to StreetAccount, Wall Street analysts had been expecting the company to report 1% growth in same-store sales.
In the U.S. alone, same-store sales fell by 3%, with a 7% dip in traffic. That made this quarter the second in which sales in the U.S. were sluggish.
But Starbucks’s international segment didn’t fare much better. Same-store sales in this unit dropped 6%. And in China — the company’s second-largest market behind the U.S. — same-store sales took an 11% nosedive. The average order ticket in China fell by 8%.
“In this environment, many customers have been more exacting about where and how they choose to spend their money,” Starbucks CEO Laxman Narasimhan said on a call with investors.
For its fiscal second quarter, Starbucks reported net income of $772.4 million, or 68 cents per share. That’s a significant drop from the year-ago quarter, when the coffee giant reported net income of $908.3 million, or 79 cents per share.
Overall, net sales fell by roughly 2% year over year, to $8.56 billion.
“In a highly challenged environment, this quarter’s results do not reflect the power of our brand, our capabilities, or the opportunities ahead,” Narasimhan said in a statement.
“It did not meet our expectations, but we understand the specific challenges and opportunities immediately in front of us.”
Nevertheless, Starbucks reported that it is now expecting revenue growth for fiscal 2024 to be only in the low single digits of percent. That contrasts negatively with previous estimates of 7% to 10% revenue growth.
In addition, Starbucks said that it is expecting global same-store sales growth to remain flat for the year — again, a letdown from its earlier forecast of 4% to 6% sales growth.
And the company is also expecting to see a same-store sales drop in China — versus a previous outlook that called for a single-digit increase.
As for earnings per share (EPS), the Seattle-based company is now expecting this metric to remain flat or show low-single-digit growth. Earlier, Starbucks had called for 15% to 20% EPS growth for its fiscal 2024.
According to Narasimhan, Starbucks’s most loyal customers have continued to purchase drinks and food at its stores — albeit with discounts offered on the company’s mobile app.
However, “occasional” Starbucks visitors have been visiting less often.
Narasimhan said that Starbucks will attempt to encourage these customers to buy coffee drinks more regularly by offering a version of its app that does not require users to be loyalty members to order online.
“While it was a difficult quarter, we learned from our own underperformance and sharpened our focus with a comprehensive roadmap of well-thought-out actions making the path forward clear,” Starbucks CFO Rachel Ruggeri said in a company release.
Musk Eliminates Tesla’s Supercharger Unit
Tesla’s (NSDQ: TSLA) recent round of layoffs included the elimination of nearly its entire Supercharger unit.
The Supercharger group has been responsible for building a network of public electric vehicle (EV) charging stations that can be used by EVs produced by all major automakers.
According to sources familiar with the matter, CEO Elon Musk personally decided to cut the nearly 500-employee unit.
The cuts will slow the expansion of the Supercharger network — a claim that Musk verified in a post on social media platform X. “Tesla still plans to grow the Supercharger network, just at a slower pace for more locations and more focus on 100% uptime and expansion of existing locations,” the controversial CEO wrote.
The news sent Tesla’s stock down by nearly 2% in trading on Tuesday.
But in addition, the move also confounded executives at other car companies, according to reports. They included Rivian Automotive (NSDQ: RIVN), Ford Motor (NYSE: F), and General Motors (NYSE: GM) — all of which are among the companies that have been adopting Tesla’s charging connectors so their own cars can access the Supercharger network.
The decision is also confusing because the Supercharger network has been one of the biggest reasons to buy Tesla’s EVs rather than those made by competitors. The network offers more than 6,249 stations and more than 57,000 connectors in the U.S.
In fact, during the company’s quarterly earnings announcement last week, Tesla touted recent growth in the Supercharger division.
“Starting at the end of February, we began opening our North American Supercharger Network to more non-Tesla EV owners,” the company’s presentation said.
Without the Supercharger division — and its senior director, Rebecca Tinucci — it’s not clear who will manage the charging partnerships between Tesla and other carmakers.
Carvana’s Surprise Forecast
Shares of Carvana (NYSE: CVNA) rocketed yesterday after the used-car company forecast an unexpected rise in current-quarter sales.
As it turns out, the Federal Reserve’s high interest rate regime has turned into a boon for the company. The high costs of financing a vehicle purchase have caused many consumers to turn to the secondhand market rather than buying a new car.
According to Carvana, it is expecting a sequential increase in its adjusted core profit and growth rate for the second quarter. Previously, analysts had projected a 2.6% loss in sales from the year-ago quarter.
And for the first quarter, Carvana reported revenue of $3.06 billion — higher than Wall Street’s estimate of $2.89 billion, according to LSEG.
Carvana’s first-quarter EBITDA (earnings before interest, tax, depreciation, and amortization) was $235 million. Analysts had expected only $135.9 million.
In addition, the used-car retailer reported a first-quarter profit of $49 million — again, higher than analyst estimates of $31.2 million.
Year to date, Carvana’s stock has seen gains of roughly 80%. And in the last 12 months, the used-car company’s shares have delivered gains of more than 1,000% to its investors.
Clearly, Carvana is doing something right that rival retailer Carmax (NYSE: KMX) isn’t. Year to date, Carmax has dropped by roughly 12%.
iPhone Losing Market Share in China
China’s volatile smartphone market appears to have finally stabilized, but shipments still lag the pre-pandemic years.
In the first quarter of 2024, a total of 67.8 million smartphones were shipped in the country. That’s about the same as in the year-ago quarter, but fewer than in prior quarters, according to Canalys.
By comparison, in 2019, roughly 100 million smartphones were shipped in China per quarter.
Now, China is a very important market for U.S.-based electronics giant Apple (NSDQ: AAPL). However, in recent quarters, the Cupertino Giant has lost its market share. In the most recent, the iPhone was only the fifth most popular cellphone in China.
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