With operating profit down 45%, the “Back to Starbucks” plans aren’t bearing any fruit yet
Brian Niccol has a tough gig on his hands, with Starbucks shares dropping sharply after a weak quarter.
Starbucks is promising a four-minute wait time for customers to get their grande latte, but investors might have to wait longer for the coffee giant to deliver the results they were hoping for when Brian Niccol took the top job at Starbucks in September.
The world’s largest coffee chain posted a 45% decline in quarterly operating income yesterday, its fifth straight quarter of declining same-store sales, with SBUX shares opening down 10% in premarket trading this morning.
Since being poached in September for his star-studded track record at Chipotle, CEO Brian Niccol has been brewing a bold turnaround strategy to reverse Starbucks’ yearlong sales slump. So far, that “Back to Starbucks” plan has involved writing names on to-go cups, bringing back ceramic mugs, and requiring a purchase for customers to loiter in stores.
But the investment is coming at a cost: while Niccol touted some “real momentum” with his magnum opus on Tuesday, Starbucks also said the additional labor poured to support the plan is grinding down on the coffee giant’s profitability — an expense that the chain is seemingly willing to double down on, with plans to hire even more baristas.
Double shot
Starbucks’ slumping profitability, down to become the worst non-Covid quarter in more than a decade, is another bitter shot of disappointment for the already struggling coffee chain, which has been juggling weak consumer spending and skyrocketing costs of coffee beans (thanks to a certain Diet Coke enthusiast) domestically while being squeezed out by strong competitors in China — a region that had been the Starbucks growth engine for much of the last two decades.
