Starbucks suffers worst decline in sales since pandemic shutdown

Starbucks expects to report its worst decline in sales since the pandemic as wary American consumers shun the coffee shop chain’s $5.95 lattes.
The coffee retailer suspended its annual forecast after global same-store sales fell 7 per cent in the fourth quarter, according to preliminary results unexpectedly published on Tuesday.
The poor performance was led by a 6 per cent decline in comparable sales in the US, its biggest market.
In China, same-store sales fell 14 per cent as the coffee store faced intensified competition and a weak economy that impacted consumer spending.
Starbucks’ shares tumbled $3.66, or 3.8 per cent, to $93.16 in after-hours trading after the company released the results. The decline in same-store sales represents the sharpest fall since the fourth quarter of 2020, when pandemic lockdowns sent same-store sales down 9 per cent. Overall revenues in the fourth quarter declined 3 per cent to $9.1 billion.
The coffee shop chain has pledged to improve its customer experience under Brian Niccol, 50, who was poached from Chipotle Mexican Grill, the restaurant chain, to take over as chief executive in September. Niccol replaced Laxman Narasimhan, 57, who stepped down after just over a year in the role amid declining sales.
Starbucks said it was suspending its annual forecasts for the year ending September 2025 due to the chief executive transition coupled with the “current state of the business”.
Rachel Ruggeri, chief financial officer, 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.
“We are developing a plan to turn around our business, but it will take time.”
Niccol said the latest results made it “clear that we need to fundamentally change our strategy so we can get back to growth”.
In a pre-recorded video released on Tuesday, he said the company would focus on returning to growth in its US market by improving the customer experience, especially during the morning peak.
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.”
Niccol said that baristas needed to be given “meaningful career growth and industry-leading benefits” to make Starbucks the best job in retail. He pledged to address staffing issues in stores, remove bottlenecks and simplify processes for baristas.
“We are reorienting all our work to ensure we deliver a high-quality, hand-crafted beverage, prepared quickly and with care, and handed directly to the customer by our barista.”
The company is planning to change its mobile order and pay system so that “it doesn’t overwhelm the café experience”, Niccol said.
Critics have complained that Starbucks has drifted too far from its roots as a community hub for coffee drinkers. Comfy leather armchairs have been replaced with wooden chairs, while baristas are sometimes too busy juggling in-store, app and drive-through orders to chat.
“Even if customers don’t want to stay in the café each time they visit, we know they expect our stores to look and feel like the community coffee house they remember,” Niccol said.
Niccol is under pressure to impress investors after joining Starbucks on a base salary of $1.6 million a year and an annual cash incentive opportunity at a target of 225 per cent of his base salary and a maximum 450 per cent of base pay.
He is eligible to receive annual stock awards with a target value of $23 million. The contract will be worth about $113 million if he meets the targets set for him by Starbucks.