Starbucks CEO vows to overhaul its cafes and simplify its menu
Rewrites to add CEO comments, background in paragraphs 1-13
By Juveria Tabassum and Waylon Cunningham
Oct 30 (Reuters) -Starbucks SBUX.O CEO Brian Niccol on Wednesday told investors that he plans to overhaul Starbucks U.S. locations, adding more comfortable seating, ceramic mugs and a coffee-condiment bar, with customer wait times of less than four minutes.
Faced with falling demand for its pricey beverages in the key U.S. and China markets as well as a slide in its share price, Starbucks' investors are counting on the new CEO to steer the company back to growth.
The company last week suspended its forecast for its 2025 fiscal year.
"Our financial results were very disappointing, and it is clear we need to fundamentally change our strategy to win back customers and return to growth," Niccol said.
The CEO said he wanted to make it "easier for our customers to get a cup of coffee," and that the company would aim to reduce wait times to less than four minutes. To help with that, and to make prices clear, Niccol also said the company would be simplifying its menu.
Niccol said staffing levels might increase, addressing a complaint that has often been voiced by baristas and by Starbucks Workers United, which is seeking to unionize Starbucks workers. "I want to make sure that the teams are staffed to win every transaction," he said.
Investors are hoping that Niccol, an industry veteran and former Chipotle Mexican GrillCMG.N head, will simplify the company's leadership and operating structure, and reinvigorate the coffee-house culture at Starbucks' U.S. stores.
Niccol said ceramic mugs would be offered to customers who are staying in the café, and that actions would be taken over the coming months to separate pick-up orders from sit-down orders. He said "common sense guardrails" would be placed on mobile ordering.
Shares of the company have risen about 26% since Niccol replaced Laxman Narasimhan as CEO in a surprise announcement in August. They were little changed in extended trading on Wednesday.
Starbucks posted a 7% drop in global comparable sales for the fourth quarter on Wednesday, after reportingpreliminary results for the quarter ended Sept. 29 last week.
Comparable transactions, which reflect traffic at its stores, fell for the third straight quarter in North America.
The Seattle-based company's strategy to drive demand through promotions and improved loyalty program offers has fallenflat in the face of muted spending from cost-conscious consumers. Niccol acknowledged on Wednesday that the company had focused marketing too narrowly on rewards members.
Growth in its loyalty program was tepid in the fourth quarter, with 90-day active members in the U.S. remaining flat sequentially. That compares with a 3% sequential rise reported in the third quarter.
Starbucks is also facing an uphill battle in China, where it is dealing with a choppy macroeconomic recovery and stiff competition from local brands.
Comparable sales in China, the company's second-largest market after the U.S., declined for three straight quarters, falling 14% in the fourth quarter.
International comparable sales fell 9% in the fourth quarter, wider thana 6.5% drop expected by analysts, as per data compiled by LSEG.
The company's net income fell to $909.3 million, or 80 cents per share, from $1.22 billion, or $1.06 per share, a year earlier in the fourth quarter ended Sept 29.
Some menu simplifications are coming soon. A company spokesperson on Wednesday confirmed the chain will on Nov. 7 be removing from the menu its olive-oil-infused drinks, which were backed by former Starbucks CEO Howard Schultz, though the decision was made before Niccol became CEO.
Reporting by Juveria Tabassum and Waylon Cunningham; Editing by Anil D'Silva
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
