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Starbucks' (SBUX) financial results are still in need of a strong dose of caffeine as the coffee chain's global same store sales slipped by 3% in Q3, but business seems to be stabilizing, if not modestly improving, which is good enough to provide the stock with a jolt today. After lowering its FY24 revenue and comp guidance in both Q1 and Q2, SBUX reaffirmed all of its financial targets during last night's earnings call, offering a sense of relief for a battered shareholder base that had seen the stock dive by 22% year-to-date prior to today's gains.

• The company still expects FY24 revenue growth in the low-single digit range, global and U.S. comps down low-single digits to flat, and operating margin also approximately flat. Encouragingly, CEO Laxman Narasimhan commented that key indicators are trending in the right direction as the company's three-part turnaround plan takes hold.
  • That plan includes improving throughput and speed of service, launching new menu items to improve foot traffic, which fell by 6% in Q3, and providing more value, including through offering more digital promotions to its membership base.
• However, given the stiff headwinds that SBUX is facing, a quick and substantial turnaround shouldn't be expected. In the U.S., where comps decreased by 2% on a 6% drop in transactions, SBUX is still seeing sluggish demand from non-rewards members.
• More broadly, cost conscious consumers are cutting out discretionary purchases and are choosing to make more meals and brew more coffee at home. This is evidenced by an upswing in sales for SBUX's ready-to-drink offerings.
• In China, the company's second largest market with just over 7,300 stores, conditions are even more challenging. Comps dove by a worse-than-expected 14% there due to macro-related headwinds and intensifying competition that has led to a margin-eroding price war. On that note, the average check size fell by 7% in China.
  • Despite the tough environment, SBUX still plans to expand its store count in China to 9,000 units by 2025.
• A relatively stronger area of the business was its loyalty program. U.S. Starbucks rewards members grew by 7% yr/yr to 33.8 mln and active members increased their store visit frequency in Q3. SBUX believes that recently launched menu innovations, like iced energy drinks, and new limited-time promotions provided a boost to membership growth.

The main takeaway is that you have to look very closely to find any meaningful improvement from last quarter. The company's performance and outlook, though, were better-than-feared, sparking some hope that the worst is now in the rearview mirror for SBUX.