Starbucks is trying to stage a comeback after an uncharacteristic streak of same-store sales declines over the past year and a half. Chief Executive Officer Brian Niccol, who took the helm in September, is betting he can give the US business a jolt by cutting down wait times, revamping the menu and remodelling stores to bring back seating.
While analysts and investors have generally welcomed the changes, they’ve been wary about both the timeline and the price tag. Niccol said Tuesday the turnaround efforts are “ahead of schedule,” and he vowed to unleash “a wave of innovation in 2026.” Starbucks is cutting the cost of building stores by 30%, he added, and it’s seeing progress from a new program to add more staff to stores, improve customer service, and prioritise in-store and drive-thru orders.Niccol’s goal is to bring back the cosy vibes and personal touches that once characterised Starbucks cafes. The company announced that it plans to end its pickup-only store format for mobile orders in the next fiscal year, saying those locations lacked the warmth of traditional stores.
The shares rallied as much as 5.2% in extended New York trading as investors focused on green shoots in the earnings release, including the first sales gain in China since the end of 2023. The stock has gained less than 2% so far this year, lagging the S&P 500 Index.
A smaller sales slump than expected in the US — as well as Niccol’s remarks about improved employee turnover and customer satisfaction — “point to momentum,” Bloomberg Intelligence analyst Michael Halen said.In China, the chain’s second-largest market, Starbucks has cut prices for some tea-based products and added more sugar-free options to lure back customers. The moves paid off in the quarter with 6% more transactions and a 2% bump to same-store sales.
Starbucks has been looking at selling a stake in its business in China, Bloomberg News has reported. Niccol said on a call with analysts that more than 20 parties are interested, and the company wants to retain a “meaningful” stake in the business.
Executives said operating margins declined in the quarter due to spending on the turnaround plan, including adding more baristas and hosting a conference in Las Vegas to rally store managers, as well as inflation.
The company will spend $500 million on more labor in US company-operated stores over the next year, Chief Financial Officer Cathy Smith said on the earnings call.
Smith cautioned that the company is “conservative” about the remainder of its fiscal year given changes from the turnaround plan and the uncertain consumer environment.
“Transactions are improving,” Smith said. “Just where they will net out is unclear.”
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