Starbucks reveals what a huge mess its new CEO has to clean up

New York
CNN
—

Starbucks’ new CEO, Brian Niccol, has a monumental task ahead of him to turn around the dire situation the world’s largest coffee chain currently finds itself in.

Surprisingly for Wall Street, the company unexpectedly published its preliminary earnings report on Tuesday evening, showing that sales fell sharply for the third consecutive quarter. Global sales fell 7%, fueled by a 6% decline in the United States and even more in China, where comparable sales fell 14% for the quarter ended September 29.

As a result, Starbucks (SBUX) took the extraordinary step of suspending its financial guidance for the remainder of the year. Shares fell nearly 5% in premarket trading on Wednesday.

Niccol was blunt in his assessment, writing that Starbucks’ financial performance “makes it clear that we must fundamentally change our strategy so we can return to growth.”

Some of the problems he discovered after about a month on the job include fixing the “overly complex menu,” staffing levels in the cafes, and the pricing of the drinks and food so that “every customer feels that Starbucks is worth it every time they visit. he said.

“People love Starbucks, but I’ve heard from some customers that we’ve strayed from our core, that we’ve made it harder to be a customer than it should be, and that we’ve stopped communicating with them,” says Niccol. said in a pre-recorded video. “As a result, some are visiting less often, and I think today’s results tell the same story.”

Perhaps one of the biggest changes he has already made was in its marketing. The chain recently rolled out ASMR-style commercials that highlight the sounds and visuals of its handcrafted coffee drinks. Under Niccol, Starbucks is also shifting from targeting rewards program members to advertising to attract all customers.

“Starbucks has always been a place where people come together,” says Niccol. “We are revisiting our stores to ensure we provide the amenities you would expect in a community coffeehouse.”

Tuesday’s statement marks the second time investors have heard from Niccol, a celebrated CEO who helped lead Chipotle’s recovery from the E. coli outbreak that began in 2015. Last month, he said in an open letter that he wants to return Starbucks to its roots as a “community coffeehouse” that made it the behemoth it is.

Starbucks’ full earnings figures will be released on October 30.