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Starbucks (SBUX+8.64%) reported a decline in same-store sales for the fourth straight quarter. However, the company’s earnings and revenue beat Wall Street’s expectations. Shares of Starbucks popped by more than 4% in after hours trading.
“We’re just one quarter into our turnaround, but we’re acting quickly on the ‘Back to Starbucks’ plan and seeing a positive response,” said CEO Brian Niccol, in a statement. “This shift in strategy is key to addressing our core issues, rebuilding brand confidence, and driving long-term growth.”
During the quarter, the company generated revenue of $9.4 billion, about 69 cents a share. Analysts had forecasted it would report revenue of $9.31 billion, about 67 cents a share.
That comes shortly after Starbucks tapped more former Taco Bell executives to help overhaul its operations under Niccol. Those leadership changes are part of Niccol’s plan to get Starbucks back to the basics, and are aimed at boosting efficiency and streamlining resources. Since taking charge four months ago, Niccol has worked to reverse a streak of declining sales, focusing on cutting unnecessary layers to create a more nimble company. In late Oct. 2024, Starbucks announced that corporate employees had to return to the office three days a week or quit.
One major aspect of Niccol’s approach has been to enhance the in-store experience. On Jan. 27, Starbucks brought back elements of the “classic coffeehouse vibe,” such as condiment bars, handwritten names on cups, and personalized service. The company has also promised to improve speed, with the goal of brewing fresh coffee in under four minutes, while maintaining steady prices through fiscal 2025.
The changes haven’t stopped there. Starbucks is also trimming its menu, expanding parental leave for U.S. baristas, eliminating the extra charge for non-dairy milk alternatives, restricting bathroom access to paying customers, and launching regular TV ads.
Niccol is betting that a combination of faster service and premium customer experience will keep Starbucks competitive.
Ahead of earnings, Wall Street remained cautiously optimistic. Analysts from Bank of America (BAC-0.22%), Citi (C+0.96%), and William Blair expect short-term dips in sales but potential for a recovery – though they agreed it would take time.
In China, Starbucks’ second-largest market, sales fell 6% during the quarter. In mid-December, Niccol appointed Tony Yang as the first ever chief growth officer. Yang, a former auto industry exec, has been tasked with boosting the brand’s presence through celebrity and entertainment brands. That could help Starbucks as it faces fierce market share competition from locals like Luckin’ Coffee (LKNCY+0.50%), which has rapidly expanded its presence in the region with its focus on affordable pricing and tech-driven convenience.