Narasimhan said demand for the pearls was ahead of expectations, and they had to pull back marketing since it ran out of supply, adding that "afternoons are an opportunity for us."

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. The company attributed this decline to "more cautious consumer spending and intensified competition in the past year ... and a mass segment price war."

Narasimhan said the team is in the "very early stages" of exploring joint ventures and strategic partnerships in technology, real estate, and supply chain.

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)."

Bernstein analyst Danilo Gargiulo said franchising may be the way to go to lessen capital expenditure and exposure to volatile macro conditions.

The company still aims to have 9,000 locations in China by 2025, from its current 7,306 stores.

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.

On the call, Narasimhan confirmed that "Elliott Management is a shareholder in our company, and our conversations to date have been constructive."

Some on the Street, like Gargiulo, are wondering if this could light a fire under Starbucks.

"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," he wrote in a note to clients.

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

Earnings breakdown

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

Revenue: $9.1 billion versus $9.2 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%

The company reaffirmed its 2024 guidance, which it revised following Q2, 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.

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

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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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