To The Moon

$Starbucks(SBUX)$ is down 4% after hours after it released its preliminary earnings preview early.The normal date for companies to release earnings is a week later on 30 October.

How were the results?

• Revenue-wise it fell 3% to $9.1 billion, below market expectations of $9.4 billion, showing the company's weakness in sales and customer traffic.

• On the earnings per share front, non-GAAP EPS came in at $0.80, well below market expectations of $1.03 and $1.06 a year ago.A significant decline in the company's profitability.

• Global comparable shop sales declined 7%.Of these.

  • U.S. same-store sales were down 6% from last year, comparable transaction was down 10%, but ticket were up 4%;

  • In China, same-store sales were down 14%, comparable transaction down 6 per cent, and ticket down 8 per cent, which can be described as a combination of volume and price declines.The company's explanation: macro factors, and the competitive environment.

• At the same time, the 2025 guidelines have been cancelled.

  

Why the early release?

1. Expectation management. The preview of the performance situation can be described as "comprehensively weaker than expected", while at the same time suspended the release of fiscal year 2025 performance expectations, all of which are taboo, is the "worst case" in the earnings season.If the report is released at a time when investors are betting heavily and expecting results, it is bound to fall off a cliff.The good case is that all the gains since the CEO change in the last quarter are wiped out, and the bad case could be a drop of 20 per cent or more.With the early release, the "shorts" in the market haven't had a chance to get set up yet, and investors aren't trading with Starbucks in mind, so at least from an after-hours perspective, it's been a relatively strong performer.

2. The new CEO's cut. This comes at a time when Starbucks had set very aggressive growth targets and managed to bury former CEO Laxman Narasimhan's career.And trusting CEO Brian Niccol needed to re-evaluate and fundamentally change the strategy.This included: re-examining price positioning, adjusting marketing, highlighting handmade products, making the café more attractive and accelerating morning service, among other things.