Starbucks CEO Brian Niccol on Wednesday told investors that he plans to overhaul Starbucks locations in the US, adding more comfortable seating, ceramic cups and a coffee spice bar, with customer wait times of less than four minutes.
Faced with declining demand for its expensive drinks in key markets of the US and China, and with its share price plunging, Starbucks investors are counting on the new CEO to return the company to growth.
The company last week suspended its forecast for its 2025 fiscal year.
“Our financial results were very disappointing and it is clear that we need to fundamentally change our strategy to win back customers and return to growth,” said Niccol.
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 make pricing clear, Niccol also said the company would be simplifying its menu.
Niccol said staffing levels could be increased, addressing a complaint often voiced by bartenders and Starbucks Workers United, which is seeking to unionize Starbucks workers. “I want to make sure the teams are staffed to win every transaction,” he said.
Investors hope that Niccol, an industry veteran and former head of Chipotle Mexican Grill, will streamline the company’s management and operating structure and revitalize the cafe culture at Starbucks’ US stores.
Niccol said that ceramic mugs will be offered to customers standing in the cafe and that steps will be taken over the coming months to separate take-out orders from sit-down orders. He said “common sense advocates” will be placed on the mobile order.
The company’s shares 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 reporting preliminary results for the quarter ended Sept. 29 last week.
Comparable transactions, which reflect traffic in its stores, fell for the third straight quarter in North America.
The Seattle-based company’s strategy to drive demand through promotions and enhanced loyalty program offers has fallen in the face of muted spending by cost-conscious consumers. Niccol acknowledged Wednesday that the company had focused its marketing too narrowly on member rewards.
Growth in its loyalty program was tepid in the fourth quarter, with US 90-day active members flat sequentially. This compares with a steady increase of 3% reported in the third quarter.
Starbucks is also facing an uphill battle in China, where it is facing a sharp macroeconomic recovery and stiff competition from domestic brands.
Comparable sales in China, the company’s second-largest market after the U.S., fell for three straight quarters, falling 14% in the fourth quarter.
Comparable international sales fell 9% in the fourth quarter, more than a 6.5% decline expected by analysts, according to data compiled by LSEG.
The company’s net income fell to $909.3 million, or 80 cents a share, from $1.22 billion, or $1.06 a share, a year earlier in the fourth quarter ended Sept. 29.
Some menu simplifications are coming soon. A company spokesman on Wednesday confirmed that the chain on November 7 will remove its olive oil drinks from the menu, which was supported by former Starbucks CEO Howard Schultz, although the decision was made before Niccol became CEO.
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