Starbucks has suffered its biggest slump in sales since the pandemic shutdown prompting the world’s biggest coffee chain’s new global boss to pledge a “fundamental” change in direction.
Alarming preliminary financial results released in America last night a week ahead of schedule showed comparable store sales fallingby 7% in the fourth quarter compared with 2023.
Coffee lovers have been turning their back on Starbucks, which has around 1,200 UK stores, because of long queue waits, declining standards of service and the cost of living crisis that has made customers question the affordability of their daily latte or cappuccino.
In the core US market revenue were down 6% amid a 10% fall in transactions The Chinese market was even harder hit with sales down 14%, “weighed down by intensified competition and a soft macro environment that impacted consumer spending”, the company said.
Net revenues were 3% lower at $9.1 bn in the three months to September and earnings fell 25%. The shares fell 4%.
The situation is so serious that new CEO Brian Niccol, who only joined last month, took the rare step of suspending earnings guidance for the current financial year to give himself more time to work out the details of the new plan.
In a video released last night, Niccol said it was “clear we need to fundamentally change our recent strategy” to return to growth. Niccol said the company would be refocusing on all of its customers, not just members of its loyalty program.
He added that Starbucks plans to simplify its “overly complex menu,” fix its pricing and make sure all its drinks are handed directly to customers. These have been among been top complaints from customers and baristas in recent years. He said the company would “ensure that every customer feels Starbucks is worth it every single time they visit.”
He continued: “We need to focus on what has always set us apart — a welcoming coffee house where people gather and where we serve the finest coffee, handcrafted by our skilled baristas,” he said.
Chief financial officer Rachel Ruggeri said. “Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top-line and bottom-line. While our efficiency efforts continued to produce according to plan, they were not enough to outpace the impact of the decline in traffic. We are developing a plan to turn around our business, but it will take time.”
The company ousted former CEO Laxman Narasimhan in August and hired Niccol, after six years turning around burrito chain Chipotle Mexican Grill.
But he faced criticism over his plan to commute almost 1000 miles a day from his family home in Newport Beach, California, to the firm's headquarters in Seattle on a corporate jet.
