Starbucks revealed on Tuesday that its sales for the fiscal first quarter exceeded expectations, signaling progress in its efforts for revitalization.
The well-known Seattle-based coffee brand reported stable revenue of $9.4 billion for the 13-week period concluding on December 29, which surpassed Wall Street’s predicted figure of $9.3 billion, as indicated by analysts gathered by FactSet.
Chairman and CEO Brian Niccol, who took the helm in September, highlighted that customer-centric initiatives—such as eliminating additional charges for non-dairy milk and streamlining the menu—are contributing positively to service improvement and increasing foot traffic in stores.
During a conference call with investors, Niccol outlined Starbucks’ strategy to reduce its food and beverage selections by 30% throughout the year. This decision aims to enhance operational efficiency and accelerate service delivery. Additionally, the corporation intends to introduce digital menus in all company-operated U.S. locations within the coming 18 months, allowing for clearer ordering options and adjusting offerings based on the time of day.
Niccol mentioned that further staffing additions were being made in certain locations, along with a trial of new ordering algorithms designed to prioritize in-store customers and better manage mobile orders.
“The primary challenge we face is the lack of control over mobile orders,” Niccol explained. “With orders arriving simultaneously, they often overwhelm our capacity, resulting in drinks piling up while we struggle to attend to in-store patrons.”
Starbucks is keen on redefining itself as a community gathering spot. This week, the company announced it will transition to using ceramic mugs and provide complimentary refills of coffee or tea for customers dining in. Furthermore, in an effort to foster an environment conducive to commerce, a new policy will ensure that customers must make a purchase to utilize the restroom or to lounge inside the café.
“This initiative is a return to the essence of what makes Starbucks a distinctive venue,” Niccol stated.
Despite these efforts, same-store sales—sales at locations that have been open for at least one year—dipped by 4% compared to the previous year. This decrease was an improvement over the anticipated 5.5% decline and markedly better than the last quarter’s drop of 7%.
Within the U.S., same-store sales also saw a 4% drop during the first quarter, attributed to an 8% decline in transactions, although the average spend per visit increased. Niccol mentioned that the company has also decreased discount offerings as part of its strategy.
On his recent trip to China, Starbucks’ second-largest market, Niccol observed that sales were being impacted by more affordable competitors. In this market, same-store sales plunged by 6% during the fiscal first quarter. Niccol emphasized that the company is actively pursuing a strategic partnership aimed at bolstering growth in China.
Additionally, Niccol has begun restructuring the corporate staff. On Tuesday, he announced the resignations of two senior executives, accompanied by a reorganization of their roles.
Mike Grams, formerly president of Taco Bell, will take on the role of chief stores officer for North America at Starbucks. Meredith Sandland, previously the CEO of Empower Delivery and the former chief development officer at Taco Bell, will serve as the company’s chief store development officer.
Niccol, who led Taco Bell until 2018 before joining Chipotle, also disclosed plans for an unspecified number of corporate layoffs by early March.
Following the announcements, Starbucks’ stock saw a modest increase of less than 1% during after-hours trading on Tuesday.