The situation: Despite logging a sixth consecutive quarter of negative comps in FY Q3, CEO Brian Niccol—who famously steered Chipotle out of its food‑safety crisis—said Starbucks’ turnaround is running ahead of schedule.
The details: Niccol has a clear strategy that includes simplifying Starbucks’ menu, speeding up service, making its cafes more welcoming, and focusing on hospitality to drive customers to return more often.
- He also aims to roll out a wave of changes next year that include launching better-for-you offerings like protein cold foam and improving its food options.
- At the same time, he plans to launch a new Starbucks app and a “refreshed” Rewards program to improve the customer experience.
The numbers:
- Adjusted earnings per share were 50 cents, down 46% YoY, or 45% on a constant currency basis, and short of the 65 cents analysts expected.
- Revenues of $9.46 billion, up 3.8%, were ahead of $9.31 billion expected.
- Global same-store sales declined 2%, a steeper drop than estimates of a 1.3% decrease, according to StreetAccount.
- North American same-store sales fell 2%, ahead of the 2.5% decline that analysts expected. Transactions fell 4%, and the average ticket rose 2%.
- China same-store sales grew 2%. Transactions increased 6%, but the average ticket fell 4% as Starbucks cut prices for its drinks in China to compete with lower-priced rivals, like Luckin Coffee.
Although the company’s comps remained negative, Starbucks did beat on revenues and modestly outperformed expectations in its core North American market—small signs the turnaround plan is gaining traction.
Our take: While it’s encouraging to see Starbucks take some small steps in a positive direction, the road ahead is still steep. Consumers remain price‑sensitive, agile rivals in the US and China are taking multiple paths to steal share (both value‑led and trend‑driven), and commodity costs are rising.
To break out of its sales slump, Starbucks must execute on four fronts:
- Make service faster and better. The chain needs to speed up service without sacrificing the high-touch hospitality that Niccol is seeking.
- Find ways to differentiate. It’s easy to roll out new offerings, but it's hard to develop unique beverages that consumers will clamor for rather than recoil at (who can forget Starbucks’ Oleato line of olive oil-infused drinks?).
- Lean on technology. Refreshing Starbucks’ Rewards program and revamping its app are proven tools to drive occasional customers back into its stores.
- Stabilize China. Price cuts may lift traffic, but Starbucks needs to balance volume gains against margin erosion and fend off lower‑priced competitors such as Luckin.
Nailing these pillars—speed, product innovation, tech‑powered engagement, and a calibrated China play—will determine whether early green shoots turn into sustained growth.