Starbucks is struggling in America — in China, things are much worse

The world’s largest coffee chain is losing customers. Yesterday, Starbucks reported that its profits (earnings per share) fell by 25% in the last year, driven by a major slowdown in the US. In short, Americans went to Starbucks a lot less but paid more when they got there: comparable US transaction volumes fell 10% in the quarter, but were offset by a 4% rise in the average ticket size (for a net fall of ~6%).

That’s a bitter brew to swallow for new CEO Brian Niccol, who only started in September, as he works to implement his “Back to Starbucks” strategy, which includes reestablishing Starbucks as “the community coffeehouse.”

But the problems in the American business look relatively mild compared to China — a market where Starbucks has spent billions of dollars opening more than 7,000 restaurants in the last 2.5 decades. As we wrote earlier this year, Starbucks’ China business has been strained for years. Despite the company’s relentless expansion in China, same-store sales in the country have been falling. Since the start of 2019, the company has nearly doubled its store count in the country — sales haven’t followed anywhere near the same trajectory.

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