Starbucks (SBUX) delivered preliminary Q4 results on Tuesday that took Wall Street by surprise. The company announced a 3% year-over-year drop in revenue to $9.1 billion, with earnings per share falling 24% to $0.80. Additionally, Starbucks suspended its full-year fiscal 2025 guidance, attributing it to the transition to new CEO Brian Niccol and the need for time to develop new strategies. Following the announcement, shares dipped 3% in after-hours trading.

In the US, same-store sales decreased by 6% year-over-year in Q4, driven by a 10% drop in foot traffic despite a 4% rise in the average ticket size. Despite heavily promoted in-app deals, such as the pairing menu offering coffee with a croissant or breakfast sandwich for $5 or $6, Starbucks admitted these initiatives "did not improve customer behaviors."

In China, same-store sales dropped 14%, with a 6% decline in foot traffic and an 8% reduction in average ticket size. The company blamed the weak performance on "intensified competition and a sluggish macroeconomic environment" that hindered consumer spending. Before the report, Starbucks shares had risen 3% year-to-date and were up 10% over the past six months, as investors were hopeful about Niccol, the former Chipotle (CMG) CEO, taking charge. Starbucks will officially release its full Q4 and fiscal year 2024 results on October 30.

Niccol faces a challenging road ahead as he works to steer Starbucks back on course. He has already initiated leadership changes, including appointing his longtime associate Tressie Lieberman as global chief brand officer, effective November 4. Lieberman, previously Yahoo's CMO, will be part of the overhaul. In a video posted on Starbucks' website, Niccol reiterated some of the key points he made in a letter during his first week as CEO, such as the need to simplify the menu, address pricing and value perceptions, and strengthen customer loyalty.

"We are transforming our marketing strategy. We’ve been primarily targeting Starbucks Rewards members rather than engaging with all our customers. You’ve likely noticed the changes already," said Niccol, who is known for his expertise in marketing.

"I am confident our challenges are solvable, and we have significant strengths to build on. My career has been dedicated to understanding and growing brands, and it’s clear that Starbucks remains a strong and enduring brand,” he added.

Paraphrasing text from "Yahoo!Finance" all rights reserved by the original author.