Dive Brief:
- Starbucks comparable transactions were down 10% in the U.S. during fiscal Q4 2024. The results "reflect [a] challenged customer experience," the company said Tuesday in a preliminary earnings release. Traffic declines have deepened since fiscal Q3, when they fell 6%.
- U.S. comparable store sales were down 6% for the period, despite a 4% increase in average ticket. Comparatively, same-store sales were down 2% during fiscal Q3.
- The company said its investments in expanding its range of products alongside frequent in-app promotions and integrated marketing did not actually improve customer frequency. This contributed to lower-than-expected performance, the company said.
Dive Insight:
Starbucks’ new CEO Brian Niccol shared his four-part plan in September to help return the coffee chain to its core identity. Niccol joined the chain after Laxman Narasimhan stepped down from his post amid criticism from activist investor Elliott Management Group and former CEO Howard Schultz over the company’s lackluster performance.
Niccol’s approach includes improving workers’ ability to serve customers and offering career advancement, enhancing the morning daypart, reestablishing Starbucks as a community coffeehouse and asserting control of its brand narrative.
“I believe that our problems are very fixable and that we have significant strengths to build on,” Niccol said in a video about preliminary results, adding he spent the past few weeks talking to customers, employees and support center staff to better understand the Starbucks business.
His plan also includes addressing staffing issues in its stores, removing bottlenecks and creating a simpler experience for its workers. He said the company needs to improve its mobile and pay system so it doesn’t overwhelm cafes.
The company is reassessing its units to ensure they have the feel of a community coffeehouse and is shifting marketing to address all customers instead of only rewards members, he said.
“We will simplify our overly complex menu, fix our pricing architecture, and ensure that every customer feels Starbucks is worth it every single time they visit,” he said.
Starbucks is also in the midst of updating its beverage equipment with its Siren system, which is expected to improve efficiency. As part of Niccol’s plan, the company will additionally invest in technologies that can further improve the employee and customer experience.
“While our efficiency efforts continued to produce according to plan, they were not enough to outpace the impact of the decline in traffic,” CFO Rachel Ruggeri said in a statement. “We are developing a plan to turn around our business, but it will take time. We want to amplify our confidence in the business, and provide some certainty as we drive our turnaround.”
