Starbucks (SBUX) missed the mark on revenue and same-store sales growth yet again.

Q3 revenue fell 1% to $9.1 billion, lower than expectations of $9.20 billion, per Bloomberg consensus estimates.

Global same-store sales declined for the second quarter in a row, down 4%, while overall foot traffic fell 5%.

Adjusted earnings per share did come in slightly higher at $0.93, compared to estimates of $0.92.

In the release, CEO Laxman Narasimhan said its three-part action plan "is beginning to work and driving operational improvements that we expect to improve financial performance," with a goal to "return the business to sustainable growth."

That plan, introduced following its Q2 results, includes getting more customers throughout the day, launching new items while "maintaining our focus on core coffee forward offerings," and providing more value.

The size of the average check was up a tad higher, up 2%, due to menu price increases.

This quarter, it rolled out new items like popping boba-like pearls and iced energy drinks. It also launched limited-time “pairing menu," which allows customers to get a small iced or hot coffee with a butter croissant or breakfast sandwich for $5 or $6.

But it doesn't seem like it was enough to turn the tide. Same stores sales declined 2% in the US.

Prior to the results, Deutsche Bank analyst Lauren Silberman, who has a Hold rating on the stock, wrote in a note to clients that "sentiment on Starbucks continues to lean negative ... [it] has been less topical than other large caps and relative to the past few quarters."

"Cyclical macro issues" may be to to blame, per a note from Baird analyst David Tarantino prior to the results. He anticipated softness in the majority of fiscal 2024 sales as consumers pull back on discretionary spending, "including afternoon occasion at Starbucks." He has a Hold rating on shares.

This earnings report comes as pressure is mounting from activist investor Elliott Investment Management, which took an undisclosed stake in the company, according to a report from WSJ.

"Investors have questioned Elliott’s experience and track record in the consumer sector, we believe that an external nudge may accelerate making bold decisions and may offer interesting risk-reward opportunities for long-term investors willing to accept that a turnaround may take time," Bernstein analyst Danilo Gargiulo wrote in a note to clients.

Here are 10 items Gargiulo believes the Elliot team would prioritize.

Its second-largest market, China saw the biggest drop of all Starbucks segments.

Same-store sales fell 14%, compared to last quarter when they were down 11%.

Foot traffic there fell 7% and so did the average check size.

In a note to clients, Bank of America analyst Sara Senatore said Starbucks' performance in China is tied to industrywide struggles.

"Intense competition is the natural state of restaurant markets and even the strongest brands are not insulated," she said. "The direction of SBUX's China same-store sales growth is strongly correlated with those of other global brands. And all are correlated with macro factors (GDP)."

McDonald's (MCD) pointed to declining sales growth in China in its Q2 results as consumer sentiment remains weak in a competitive environment.

Gargiulo believes franchising may be the way to go in the market with an "equally compelling alternative to leverage buildout of one of the biggest coffee market without the capital allocation" and less exposure to "fluctuating macro-economic conditions."

The company still aims to have 9,000 locations in China by 2025.

Earnings preview

Here's what Starbucks reported, compared to estimates, based on Bloomberg consensus data:

Revenue: $9.1 billion versus $9.20 billion

Adjusted earnings per share: $0.93 versus $0.92

Same-store sales: -3% versus -2.71%

• North America: -2% versus -2.30%

  • US: -2% versus -2.37%

• International: -7% versus -5.11%

  • China: -14% versus -10.58%

Foot traffic: -5% versus -4.27%

• North America: -6% versus -4.91%

• International: -3% versus 3.71%

Ticket Growth: 2% versus 1.98%

• North America: 3% versus 3.24%

• International: -4% versus -0.63%

Following Q2, Starbucks revised its 2024 outlook for the third time this fiscal year.

It expects 2024 global revenue growth of low-single digits, down from the previous range of 7% to 10%, which itself was down from a prior guidance of 10% to 12%.

Global and US same-store sales are expected to see a low single-digit decline or stay flat, down from the previous range of 4% to 6% growth. China's same-store sales are expected to see a single-digit decline, down from the previously expected low-single-digit growth.

The company plans to provide an update on the 2024 outlook in a call with investors.

Starbucks declined to make CEO Laxman Narasimhan and CFO Rachel Ruggeri available for an interview.

This story is breaking and being updated.

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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at [email protected].

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