Starbucks investors have filed a class action lawsuit in the state of Washington against the Seattle-based coffee chain over allegedly making “false or misleading” statements regarding company financial performance. The group of investors claim that Starbucks is in violation of national securities law for making misleading claims around the company’s 2023 revenue, expected guidance for fiscal year 2024, and “the company’s reinvention and diversification of its global portfolio.”
According to the lawsuit, filed on Wednesday with the U.S. District Court in the Western District of Washington, Starbucks “provided overwhelmingly positive statements” about company performance and potential future performance while simultaneously “concealing material adverse facts” about the company’s reinvention plan, particularly in international markets like China. This in turn caused shareholders to purchase securities “at artificially inflated prices.”
During the quarter in question, Starbucks reported its first same-store sales decline since the pandemic for 2Q 2024, which resulted in stocks of the company plummeting 16% over the course of one day. Narasimhan conceded during the earnings call in May that the results were “disappointing” and revised its annual fiscal guidance to reflect the negative shift in performance.
This disappointing second quarter was followed by a similar third quarter performance of 3% same-store sales decline driven by shrinking traffic. At the time Narasimhan continued to blame the more cautious consumer environment and doubled down on Starbucks’ reinvention plan.
Earlier this month, following the two quarters of disappointing earnings results and alleged internal scuffles with multiple activist investors, Laxman Narasimhan was ousted from the CEO role after just under 18 months at the helm and replaced by Chipotle CEO Brian Niccol, who will officially take over as CEO of Starbucks on Sept. 9.
The class action lawsuit was filed on behalf of all investors who purchased or acquired Starbucks shares between Nov. 2, 2023, and April 30, 2024, and seeks to recover damages caused by the alleged violations of securities law.
Contact Joanna at [email protected]
