Starbucks defeats shareholder lawsuit over US, China sales declines

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.