Starbucks Defeats Shareholder Suit Over US, China Sales Drops

A federal judge dismissed a lawsuit accusing Starbucks of defrauding shareholders by intentionally concealing declining sales in the United States and China, its largest markets.

• U.S. District Judge John Chun in Seattle said Starbucks’ “innocent explanation” that former Chief Executive Laxman Narasimhan genuinely believed during a January 2024 analyst call that he was assessing sales trends in the just-completed quarter was “at least as compelling” as shareholders’ claim that he was assessing current sales trends.
• Chun ruled on Wednesday, after having allowed the case to proceed last November.
• Lawyers for the shareholders, who are led by three pension plans in New York, did not immediately respond to requests for comment on Thursday.
• The lawsuit followed a 16% decline in Starbucks’ share price on May 1, 2024, one day after Starbucks lowered its annual sales forecast and said same-store sales fell 4.4% in its latest quarter. Those sales reflected declines of 3% in the United States and 11% in China.
• Brian Niccol, who succeeded Narasimhan as chief executive, has pursued a “Back to Starbucks” turnaround plan focused on simplified menus, shorter wait times, upgraded stores, improved in-store technology, and closures of poorly performing stores.

(Reporting by Stempel in New York; Editing by Chizu Nomiyama)