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Starbucks reported a fourth straight drop in same-store sales but said a new turnaround plan was gaining traction, as its CEO suggested the coffee chain’s US footprint could double in the years to come.
The Seattle-based company’s cafés have drawn fewer customers over the past year, including in its largest markets the US and China. The trend continued in results published on Tuesday, with global comparable sales falling by 4 per cent in the quarter that ended in December.
But the decline was less severe than in the previous quarter and lower than the 5 per cent decrease expected by analysts polled by Visible Alpha. Shares of Starbucks rose in after-hours trading.
Brian Niccol came aboard as chief executive in September and introduced a turnaround plan he named “Back to Starbucks”, evoking nostalgia for the company’s past and reflecting an imperative to revive foot traffic in its cafés.
He told analysts the strategy had already generated a “positive response”.
In a sign of his optimism, he said that in the US “we still see potential to double our store count while improving the health of our portfolio”. Starbucks operated 10,243 US stores at the end of last year and licensed another 6,806.
Niccol has initiated changes at headquarters and in stores. Earlier this month he announced imminent job cuts for some of the thousands of people who work in Starbucks support jobs.
On Tuesday he said that two senior executives, Sara Trilling and Arthur Valdez, would be leaving the company. Mike Grams and Meredith Sandland, both of whom worked under Niccol when he was CEO of Yum Brands’ Taco Bell restaurant chain, will join Starbucks.
Grams will hold the title of North America chief stores officer, overseeing “store performance and everything that happens in them” and the more than 200,000 people inside the region’s company-operated cafés.
Sandland will become chief store development officer, in charge of designing and building stores. She has since 2022 served as chief executive of restaurant delivery company Empower Delivery and previously was chief development officer at Taco Bell.
The top store executives were hired a day after Starbucks modified offerings inside stores, bringing back condiment bars stocked with milk, cream and sugar, and ceramic mugs with free coffee refills.
Starbucks also imposed a new code of conduct at stores, requiring visitors to purchase something if they wanted to sit at a table or use the restroom. The code reversed a policy enacted in 2018 that declared anyone who crossed the threshold as a customer.
Niccol has set out longer-term aims, including fulfilling store-placed orders within four minutes and separating them from orders flowing in from the Starbucks app. On Tuesday he discussed plans to implement an algorithm that would manage orders so café customers would not have to wait behind customers placing orders remotely from their phones.
“It sequences those mobile orders, so it can allow the café order to get fulfilled in a timely fashion and with a touch of humanity,” Niccol said.
Net revenue in the quarter was roughly even from a year before at $9.4bn, beating Wall Street estimates of $9.3bn. Net income fell 24 per cent year on year to $781mn, above estimates of $774mn.
