Latest news with #CathySmith
Yahoo
13-05-2025
- Business
- Yahoo
SBUX Q1 Earnings Call: Turnaround Efforts Prioritized as Sales Miss Expectations
Coffeehouse chain Starbucks (NASDAQ:SBUX) missed Wall Street's revenue expectations in Q1 CY2025 as sales rose 2.3% year on year to $8.76 billion. Its non-GAAP profit of $0.41 per share was 15.2% below analysts' consensus estimates. Is now the time to buy SBUX? Find out in our full research report (it's free). Revenue: $8.76 billion vs analyst estimates of $8.82 billion (2.3% year-on-year growth, 0.6% miss) Adjusted EPS: $0.41 vs analyst expectations of $0.48 (15.2% miss) Adjusted EBITDA: $1.14 billion vs analyst estimates of $1.23 billion (13% margin, 7.7% miss) Operating Margin: 6.9%, down from 12.8% in the same quarter last year Free Cash Flow was -$297.2 million compared to -$153.1 million in the same quarter last year Locations: 40,789 at quarter end, up from 38,951 in the same quarter last year Same-Store Sales fell 1% year on year (-4% in the same quarter last year) Market Capitalization: $97.36 billion Starbucks' first quarter results reflected ongoing challenges as the company reported revenue and profit below Wall Street expectations. Management attributed performance to continued investments in its "Back to Starbucks" turnaround plan, which focuses on improving store operations, enhancing the customer experience, and resetting the cost structure. CEO Brian Niccol noted that early signs of progress are visible, particularly in North America, but acknowledged that financial performance remains below the company's potential at this stage of the turnaround. Looking ahead, Starbucks leadership emphasized patience, stating that the turnaround will take time to fully translate into improved financial outcomes. CFO Cathy Smith highlighted a focus on disciplined investment and cost management, with an intention to balance near-term operational challenges with long-term growth opportunities. Management refrained from providing detailed financial guidance, citing the ongoing nature of strategic changes and the need for further progress before offering a more specific outlook. Management highlighted several company-specific operational and strategic initiatives that shaped the quarter's results and are intended to drive longer-term improvements. Key themes included operational resets, labor investments, market-specific adjustments, and a renewed focus on customer experience. Labor Investment and Service Model: Starbucks prioritized investing in store labor and a new "green apron" service model over equipment upgrades, targeting improved throughput, customer connection, and transaction growth. This approach was piloted in hundreds of stores and is being scaled nationwide. Menu Simplification and Innovation: The company continued to simplify its menu, removing slower-selling items to focus on core coffee offerings and new platforms such as the Cortado and matcha beverages. These changes are designed to enable more impactful product innovation and operational efficiency. Store Portfolio and Cost Reset: Management acknowledged rising costs in new store builds and renovations and is temporarily slowing unit growth to focus on reducing build costs and improving store economics before ramping expansion. Marketing and Brand Repositioning: A multi-channel brand campaign and menu innovation drove higher engagement, especially among non-loyalty customers. Management pointed to improvements in brand perception and customer preference as evidence of early impact. International Market Adjustments: The company cited positive comp sales in eight of its top ten international markets, with tailored product launches and local marketing, particularly in Canada, the UK, Japan, and China, supporting recovery and growth. Starbucks' outlook centers on scaling operational changes, managing cost headwinds, and adapting to consumer sentiment, with management focused on long-term growth and margin recovery as the turnaround progresses. Operational Efficiency Initiatives: The rollout of new labor models, order sequencing technology, and menu simplification is expected to gradually improve transaction trends and customer satisfaction as these programs reach more stores. Margin Pressures and Cost Management: Margin recovery will depend on balancing increased labor investments with reductions in store build costs, supply chain adjustments due to tariffs, and the impact of commodity prices, particularly coffee. Consumer and Market Dynamics: Management cited uncertainty in consumer demand and macroeconomic conditions as ongoing risks, but believes that store experience improvements and targeted marketing can help offset external headwinds. David Palmer (Evercore ISI): Asked how shifting from equipment investment to labor and technology would impact store-level costs and rollout speed. Management confirmed the approach allows for faster deployment with cost discipline, but said it was too early to quantify the financial impact. Sara Senatore (Bank of America): Questioned whether labor investments would permanently alter store economics and margin profile. CEO Brian Niccol stated the strategy aims for higher-quality, non-discount-driven transactions and expects margins to recover as growth returns. David Tarantino (Baird): Sought clarity on the store portfolio review and pace of new unit growth. Management explained that store openings would slow temporarily while design and cost resets are implemented, with expansion to accelerate later. Brian Harbour (Morgan Stanley): Asked if menu simplification impacted transactions and how innovation would be sequenced. Management reported improved transaction comps in more stores and described a structured process for introducing new items to ensure operational fit and customer relevance. Christine Cho (Goldman Sachs): Inquired about early results from the order sequencing algorithm for mobile and in-store orders. Starbucks cited reduced wait times and improved partner experience in pilot stores, supporting broader rollout. In the coming quarters, the StockStory team will be closely monitoring (1) the nationwide rollout and operational impact of the green apron service model and order sequencing technology, (2) evidence of margin stabilization as labor investments are scaled and store build costs are reset, and (3) transaction and comp sales trends in key geographies, especially North America and China. The pace and effectiveness of menu innovation and marketing efforts will also be important indicators of progress. Starbucks currently trades at a forward P/E ratio of 27.2×. In the wake of earnings, is it a buy or sell? The answer lies in our free research report. Donald Trump's victory in the 2024 U.S. Presidential Election sent major indices to all-time highs, but stocks have retraced as investors debate the health of the economy and the potential impact of tariffs. While this leaves much uncertainty around 2025, a few companies are poised for long-term gains regardless of the political or macroeconomic climate, like our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 176% over the last five years. Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Exlservice (+354% five-year return). Find your next big winner with StockStory today. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
02-05-2025
- Business
- Business Insider
Starbucks is embracing a tough cost-cutting method that's led workers elsewhere to bring their own coffee to work
Starbucks is planning to use a cost-cutting method with a tough reputation as it continues its turnaround. The method, called zero-based budgeting, asks managers to justify every item they spend on each year, instead of using the previous year's spending as a baseline as many companies do. Starbucks executives say ZBB will help them find savings as they spend more on their Back to Starbucks plan, including paying for more hours for the baristas who staff its stores. "We're going to be looking at ways to grow the business and also take a really hard look through the zero-based budgeting approach to understand where else there might be some offsets," CEO Brian Niccol said during the company's earnings call on Tuesday. "I love deploying a few tools like zero-based budgeting" to "help us get after some of those maybe-stranded costs," CFO Cathy Smith, who joined Starbucks in the last few weeks, also said on the call. A Starbucks spokesperson did not respond to questions about how the company planned to use zero-based budgeting. ZBB gained popularity in the 1970s, thanks in part to former president Jimmy Carter, who advocated — ultimately unsuccessfully — for its use by the federal government. More recently, some major brands have adopted the strategy. Private equity firm 3G Capital has deployed the method at Stella Artois-maker AB InBev and Kraft Heinz, the company that makes Oscar Mayer and Lunchables, for instance. The strategy, which includes moves like making all senior execs fly coach class even over long distances, did lower costs and improve the companies' margins. But in some cases, the spending cuts were so severe that it made it tough for employees to do their jobs, Business Insider reported in 2021. One employee, who had recently left Kraft Heinz at the time, told BI that she could only spend $5 annually on office supplies. She also had to bring in her own Keurig pods from home since the company, which makes Maxwell House coffee, provided no coffee in the office break room. Other Kraft Heinz employees told BI that strict spending controls hampered the development of new products and ultimately made it less competitive. Some companies have adopted the method at key turning points. Managers at X, formerly known as Twitter, reportedly had to use zero-based budgeting after Elon Musk bought the company in 2022, for instance. And in 2020, General Motors implemented ZBB as a way to manage its way through disruptions caused by the pandemic. The company temporarily cut spending by slashing advertising and furloughing some employees, then-CFO Dhivya Suryadevara said at an investor conference.
Yahoo
04-03-2025
- Business
- Yahoo
Nordstrom beats holiday-quarter sales estimates; CFO jumps ship to Starbucks
(Reuters) - Department-store operator Nordstrom beat Wall Street expectations for quarterly comparable sales on Tuesday and announced the departure of Chief Financial Officer Cathy Smith, who will join Starbucks as its new finance chief. Smith, 61, has been CFO at Nordstrom since 2023 and the company said it had initiated a search for her replacement. The Nordstrom family teamed up with Mexican retailer Liverpool late last year to clinch a $4-billion deal to take the department-store chain private. The company reported fourth-quarter comparable sales growth of 4.7%, compared with an estimate of 1.25%, according to data compiled by LSEG. "Customers responded positively to the strength of our offering across both banners in the fourth quarter," said Chief Executive Officer Erik Nordstrom. The company, which reported a net earnings increase of 23% to $165 million in the quarter ended February 1, said that it would not provide an annual forecast due to the pending transaction. It was originally scheduled to report fourth-quarter results after markets close on Tuesday.
