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Sales are falling and shares are plummeting at Starbucks as inflation reduces the appetite for treats

Starbucks CEO Laxman Narasimhan, who officially took over the coffee giant just over a year ago, on Tuesday cut annual guidance for the third straight quarter after the company’s worst performance since the pandemic. Each of Starbucks’ geographic segments showed declines, including all-important China, where comparable sales fell 11%.

In a sign that Starbucks expects more pain in the future, the chain lowered its full-year sales growth forecast from as much as 10% to a low single-digit percentage. Adjusted earnings per share could remain flat. Shares fell as much as 16%, the worst drop since March 2020.

The dismal performance raises questions about how Narasimhan will lure customers back to Starbucks, which said in November that demand for iced espressos was resilient and expressed confidence in the forecast. Narasimhan will have to convince investors — including his predecessor, Howard Schultz, who made Starbucks a global household name — that his plan will be enough as persistent inflation finally reduces demand for small treats.

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