What Happened?
Shares of coffeehouse chain Starbucks (NASDAQ:SBUX) fell 10.2% in the pre-market session after the company reported disappointing first-quarter 2025 results as its revenue, EPS, and EBITDA fell short of Wall Street's estimates. The key highlight for the quarter was the drop in global same-store sales, with North America dragging results down due to a 4% decline in transactions despite a higher average spend per order. This dip in volume led to flat sales in the U.S. and a mere 2% growth globally, with the modest revenue gain largely driven by the opening of 213 new stores rather than demand at existing ones. Overall, this was a softer quarter.
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What The Market Is Telling Us
Starbucks’s shares are somewhat volatile and have had 10 moves greater than 5% over the last year. But moves this big are rare even for Starbucks and indicate this news significantly impacted the market’s perception of the business.
The previous big move we wrote about was 27 days ago when the stock dropped 10.7% on the news that President Trump announced "reciprocal tariffs" on all US imports, set at a minimum rate of 10% or more. Markets reacted negatively to the announcement, reflecting deep concerns among investors about the broader economic implications. The tariffs were likely seen as a significant threat to global trade flows, with the potential to slow economic growth, drive up consumer prices, and spark retaliatory measures.
Wedbush analyst Dan Ives captured the prevailing market anxiety, stating, "We would characterize this slate of tariffs as 'worse than the worst case scenario' the Street was fearing." His comment highlighted how the scope and severity of the tariffs far exceeded Wall Street's expectations, adding a new layer of uncertainty for businesses and investors.
Starbucks is down 13.5% since the beginning of the year, and at $79.71 per share, it is trading 31.2% below its 52-week high of $115.81 from February 2025. Investors who bought $1,000 worth of Starbucks’s shares 5 years ago would now be looking at an investment worth $1,039.
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