Starbucks is set for a major transformation as newly appointed CEO Brian Niccol announced the need for a comprehensive overhaul after the company reported continued sales declines.
The coffee giant revealed that same-store sales fell 7% in the last quarter, prompting the suspension of its financial guidance for fiscal year 2025.
The company cited a 6% drop in US comparable sales and a more significant 14% fall in China, where it faces growing competition. Despite a 4% increase in average ticket size, overall customer traffic declined by 10%, revealing that higher prices were not enough to offset the drop in visits. Starbucks also posted a 25% year-on-year decrease in earnings per share for the quarter ending September 29, falling below analyst expectations.
Niccol, who recently joined from Chipotle, emphasized the need for a fundamental change in strategy to restore growth.
“Our fourth-quarter performance makes it clear that we need to fundamentally change our strategy so we can get back to growth,” Niccol said.
His vision includes simplifying Starbucks’ complex menu, improving its mobile ordering and payment systems, and restoring the cozy coffeehouse atmosphere that initially defined the brand.
Chief Financial Officer Rachel Ruggeri noted that while efficiency measures have been implemented, they have not been sufficient to counter the decline in customer traffic. As a result, Starbucks is taking time to review its current operations before resuming financial projections.
The company plans to focus on improving customer experience and staffing in its US stores, which Niccol views as crucial to regaining lost ground. His turnaround strategy, dubbed “Back to Starbucks,” is designed to address customer feedback that the brand has drifted from its core identity. By refocusing on its signature handcrafted beverages and fostering community through its cafés, Niccol aims to bring customers back and return the company to sustained growth.
Starbucks has also increased its quarterly dividend from 57 cents to 61 cents per share. The company’s full financial results will be released on October 30.
The Wall Street Journal, the Financial Times, and Starbucks contributed to this report.
