Latest news with #Niccol
Business Times
an hour ago
- Business
- Business Times
Starbucks CEO details brand reset plan as turnaround efforts drive sales beat
STARBUCKS reported better-than-expected revenue rise for the third quarter, as demand in China improved while investments in labor and store operations, and changes to the menu helped it offset slowing consumer spending in its domestic market. The Seattle-based company's shares rose 3.8 per cent to US$96.50 in extended trading on Tuesday. After several quarters of falling sales, the coffee chain is in the midst of a 'Back to Starbucks' initiative - a major brand reset - under CEO Brian Niccol. Since taking the top job in August, Niccol has pushed for a simplified menu, freshly baked food, cups with handwritten messages and quicker service. Niccol spoke expansively on Starbucks' turnaround efforts on Tuesday's post-earnings call, saying they were 'ahead of expectations.' He laid out examples of what was changing at stores and in customer experience. He said he wanted to change the 'feel' of stores with 'greater texture, warmth and layered design,' and replace thousands of seats that were removed in recent years. By the end of 2026, at least 1,000 stores across North America will be upgraded, Niccol said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Starbucks is also piloting a new, lower-cost 'coffee house of the future' design, featuring 32 seats and a drive-thru opening in 2026, along with a small-format version debuting soon in New York City. Niccol has pledged to increase investments in staffing in all 10,000-plus Starbucks-owned US stores by the end of the summer. The company said it would invest over half a billion dollars of additional labour hours into its US company-operated stores over the next year. Starbucks' net revenue rose 3.8 per cent to US$9.46 billion, beating analysts' estimate of US$9.31 billion, although its overall same-store sales fell 2 per cent for the quarter ended June 29, its sixth straight quarterly contraction. Analysts on average had estimated a 1.19 per cent dip, according to data compiled by LSEG. In its largest North America market, the drop in quarterly same-store sales was flat at 2 per cent. China comparable store sales increased 2 per cent, compared with no growth in the second quarter. Intense competition from local rivals like Luckin Coffee and Cotti Coffee and increasingly frugal consumers prompted Starbucks to cut prices on select iced drinks by an average of 5 yuan last month. 'The report came in less worse than expected, given some strength in China, but it remains a turnaround story,' said Dave Wagner, portfolio manager at Aptus Capital Advisors. The company reported a profit of 50 cents per share on an adjusted basis, missing estimates of 65 cents. That excluded an 11 cent per share hit, partly from a leadership meet in Las Vegas earlier this year, when the company flew and housed more than 14,000 store managers and leaders from across North America to hear from corporate executives about the 'Back to Starbucks' plan. Attendees were also treated to a private Bruno Mars concert. Operating margin in the third quarter contracted 650 basis points to 10.1 per cent from the prior year, owing to higher spending tied to the business turnaround, additional labour hours and the leadership meet. 'While there is still work to be done, the company's labour investments appear to be making a difference in peak-hour throughput,' said R.J. Hottovy, head of analytical research at Starbucks has been exploring options such as strategic partnerships and joint ventures for its China business, which was valued at up to US$10 billion, according to media reports earlier this month. Executives said on Tuesday that the company had received significant interest from more than 20 interested parties and was evaluating its options as it aimed to retain a 'meaningful stake' in the business. REUTERS
CNBC
an hour ago
- Business
- CNBC
Starbucks shares climb as CEO Brian Niccol instills confidence that a revival is underway
Starbucks shares rose more than 3% in extended trading on Tuesday, even though the coffee chain reported mixed quarterly results. Despite this, we heard enough positives to confirm that CEO Brian Niccol's turnaround remains firmly on track. Revenue increased 3.8% year over year to $9.46 billion in the fiscal 2025 third quarter, beating the $9.31 billion expected by analysts, according to LSEG. Adjusted earnings per share (EPS) fell 46% year over year to 50 cents. Given one-time costs in the quarter primarily associated with a leadership conference in Las Vegas, it's not clear if the reported EPS figure is comparable to the LSEG consensus estimate of 65 cents. SBUX YTD mountain Starbucks' year-to-date stock performance. Bottom line When you analyze an earnings report of a company in the early stages of a turnaround, you must remember to grade it on a curve. The results will be uneven, especially in the quick service restaurant industry, because some stores are upgraded well before other locations. In that context, it's no surprise that Starbucks delivered another messy quarter, but there were signs of stabilization with seven of its top 10 markets outside the United States delivered positive same-store sales growth, which is a good sign for the future because, right now, the bulk of Niccol's revitalization efforts are focused domestically. Same-store sales — sometimes also called comparable store sales, or comps — is a critical metric in the restaurant industry. More importantly, Starbucks' last three months were more about figuring out what changes to make to set it up for long-term success. Niccol described this dynamic perfectly on the earnings call when he said, "this quarter was really all about laying the operational foundation for Starbucks." Starbucks appears to have found the right strategy to return to positive comparable sales growth through its "Green Apron Service" approach. This initiative, which is the largest investment in company history, focuses on investments in labor and technology to improve the customer experience and speed up service times. Starbucks (SBUX) Why we own it: Starbucks has one of the most recognizable brands of any restaurant. But over the last few years, operations have been challenged by store inefficiencies and a slow recovery in China. Under the leadership of turnaround artist Brian Niccol, we expect operations will improve and return to growth. Competitors: Dunkin, McDonald's, Panera, Dutch Bros. Initiation date: Aug. 22, 2022 Portfolio weight: 2.53% Most recent buy: April 22, 2025 The Green Apron Service is eight weeks into its 1,500 store test program, the company said, and so far, the results have been highly encouraging. Coffee houses with the Green Apron Service are outperforming legacy stores in transactions, sales and customer wait times. Thanks to these results, Niccol and his team decided to accelerate its rollout and begin fully scaling it across all U.S. company-operated stores in mid-August. There were more than 10,000 such cafes at the end of last fiscal year. This is what matters most Tuesday, which is why we argue grading on a curve is necessary. The overall results, especially on operating margins, still leave a lot to be desired. It also marked the sixth straight quarter of negative comps. However, if the pilot program's success translates to other stores across the country, visibility into when Starbucks will return to positive same-store sales just got a whole lot clearer. Starbucks is headed in the right direction, with the percentage of company-operated cafes with positive full-day transaction comps and positive morning transactions improving for the third straight quarter. Based on everything we saw and heard Tuesday, this quarter marked another step in the right direction of building a better company, which is why we are reiterating our buy-equivalent 1 rating. Our $100 price target is under review. Quarterly commentary North America net sales beat Wall Street's expectation by a slight margin as the comparable sales decline of 2% was slightly better than expectations of a 2.5% hit. In the U.S., which makes up the bulk of the North America region, comparable sales declined by 2%, driven by a 4% decline in transactions and a 2% increase in ticket. That's not a noticeable improvement for the fiscal second quarter, where comps declined 2% driven by a 4% decrease in transaction, partially offset by a 3% increase in ticket. But margins remain heavily under pressure as the company invests in its "Back to Starbucks" initiative and adds workers to stores. Still, Niccol is bullish about the future. "While our financial results for the quarter don't yet reflect all the progress we've made, I see meaningful signs from across our U.S. business that we're on the right path," he said. Niccol's main focus is to fix the company's brand image, customer experience inside cafes, and throughput, which is a measure of how many customers are served in an hour — trusting that improved financial results will follow from these remedies. We agree and think a number of data points the company cited are leading indicators of better results in the quarters ahead. These include increased engagement scores with cafe employees and coffee house leaders; improved hourly partner turnover, meaning they're staying on the job longer; a record shift completion percentage; and a decline in customer complaints. A few other changes management announced Tuesday were plans to end its mobile order and pickup-only concept stores in fiscal 2026, and new menu innovations like protein cold foam. Turning to the international business, the sales results were OK but slightly underperformed expectations. Net revenue increased 9% year over year as the store count increased 5%. Comparable sales were flat as transactions increased 1% but ticket dropped 1%. The consensus forecast was a 2.2% increase in comparable sales. Despite the sales growth, operating margins contracted 200 basis points from last year to 13.6%. Results in China — long viewed as a key growth market but lately a thorn in its side — were actually pretty decent. Net revenue increased 8% year over year thanks to a 7% increase in store count. This was the third consecutive quarter of revenue growth in the region. Comparable sales increased 2%, driven by a 6% increase in transactions and a 4% decline in ticket, which isn't a shock given Starbucks cut prices in China during the quarter amid fierce local competition. Both comps and transactions improved two percentage points over the fiscal second quarter. Management cited beverage innovation and new customization options as drivers of the increased customer frequency. On the call, Niccol once again expressed that the company is trying to find a strategic partner for its business in China but will only enter a transaction if it makes sense. Niccol said he's received interest from more than 20 parties and is evaluating options. We trust Niccol will make the decision that's best for shareholders and long-term value creation. Guidance The company's guidance for the full fiscal 2025 remains suspended but management said they plan to hold an investor day in the second quarter of fiscal year 2026 — meaning between January and March of next year — to outline long-term plans. (Jim Cramer's Charitable Trust is long SBUX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Globe and Mail
2 hours ago
- Business
- Globe and Mail
Starbucks looks to protein drinks and other new products to turn around lagging US sales
Starbucks said Tuesday it's confident that improved store operations and new products — including a cold foam protein drink — will soon help turn around the company's lagging U.S. sales. In the meantime, slow U.S. demand continues to be a drag on the company's results. Starbucks reported that its revenue rose 4% to $9.5 billion in its fiscal third quarter. That was better than the $9.3 billion Wall Street expected, according to analysts polled by FactSet. But same-store sales, or sales at locations open at least a year, fell 2% in the April-June period. That was a bigger decline than Wall Street expected, and it was the sixth straight quarter that the Seattle-based company reported lower same-store sales. Same-store sales were up in China, Starbucks' second-largest market. Starbucks has been looking for a partner that can help it expand in China, particularly in smaller cities. Chairman and CEO Brian Niccol said Starbucks was evaluating around 20 offers. 'We remain committed to our China business and want to retain a meaningful stake,' Niccol told investors during a conference call on Tuesday. 'The intense interest in partnering with us is a testament to the great team, strong brand and long-term opportunity for Starbucks in China. It really is a vote of confidence.' But even as its sales picked up in China, Starbucks' same-store sales in the U.S. fell 2% in in the April-June period. U.S. customers spent more per order, but transactions fell 4%, the company reported. Niccol expressed optimism about a new program setting hospitality standards and staffing levels to better handle peak hours. The 'Green Apron Service' model showed so much promise in an eight-week test at 1,500 stores that Starbucks plans to roll it out across the U.S. starting in mid-August, the company said. New software is also helping stores sequence orders, cutting down on wait times. Niccol said 80% of in-store orders are now made in four minutes or less, a target he set last fall. 'I think we'll become famous for Green Apron Service and be the defining customer service company that I think Starbucks should be,' Niccol said. Niccol said improving store operations and paring back Starbucks' menu was necessary before layering in new products. In addition to protein drinks, Starbucks plans to introduce new baked goods and a new dark roast coffee next year. It will also test beverages made with coconut water, customizable energy drinks, and gluten-free and high-protein foods. Niccol said Starbucks has been working closely with employees to develop new food and drink items that can be prepared quickly and consistently. In the past, he said, the company would often develop new menu items at its headquarters and then hope baristas figured out how to make them. 'Those days are over,' Niccol said. Niccol said Starbucks is also trying to encourage customers to linger in its stores. It's closing or modifying some of its approximately 90 mobile order-only storefronts and it is developing a store prototype with 32 seats and a drive-thru window that costs 30% less than the company's current store design. Starbucks is spending heavily to turn itself around. One big expense in the third quarter was a two-day meeting in Las Vegas where the company hosted 14,000 store managers and regional leaders. The company said its net income fell 47% to $558 million in the April-June period. Adjusted for one-time items, its earnings fell 46% to 50 cents per share for the quarter. That was lower than the 65 cents analysts had forecast.
Reuters
2 hours ago
- Business
- Reuters
Starbucks CEO details brand reset plan as turnaround efforts drive sales beat
July 29 (Reuters) - Starbucks (SBUX.O), opens new tab reported better-than-expected revenue rise for the third quarter, as demand in China improved while investments in labor and store operations, and changes to the menu helped it offset slowing consumer spending in its domestic market. The Seattle-based company's shares rose 3.8% to $96.50 in extended trading on Tuesday. After several quarters of falling sales, the coffee chain is in the midst of a "Back to Starbucks" initiative - a major brand reset - under CEO Brian Niccol. Since taking the top job in August, Niccol has pushed for a simplified menu, freshly baked food, cups with handwritten messages and quicker service. Niccol spoke expansively on Starbucks' turnaround efforts on Tuesday's post-earnings call, saying they were "ahead of expectations." He laid out examples of what was changing at stores and in customer experience. He said he wanted to change the "feel" of stores with "greater texture, warmth and layered design," and replace thousands of seats that were removed in recent years. By the end of 2026, at least 1,000 stores across North America will be upgraded, Niccol said. Starbucks is also piloting a new, lower-cost "coffee house of the future" design, featuring 32 seats and a drive-thru opening in 2026, along with a small-format version debuting soon in New York City. Niccol has pledged to increase investments in staffing in all 10,000-plus Starbucks-owned U.S. stores by the end of the summer. The company said it would invest over half a billion dollars of additional labor hours into its U.S. company-operated stores over the next year. Starbucks' net revenue rose 3.8% to $9.46 billion, beating analysts' estimate of $9.31 billion, although its overall same-store sales fell 2% for the quarter ended June 29, its sixth straight quarterly contraction. Analysts on average had estimated a 1.19% dip, according to data compiled by LSEG. In its largest North America market, the drop in quarterly same-store sales was flat at 2%. China comparable store sales increased 2%, compared with no growth in the second quarter. Intense competition from local rivals like Luckin Coffee and Cotti Coffee and increasingly frugal consumers prompted Starbucks to cut prices on select iced drinks by an average of 5 yuan last month. "The report came in less worse than expected, given some strength in China, but it remains a turnaround story," said Dave Wagner, portfolio manager at Aptus Capital Advisors. The company reported a profit of 50 cents per share on an adjusted basis, missing estimates of 65 cents. That excluded an 11 cent per share hit, partly from a leadership meet in Las Vegas earlier this year, when the company flew and housed more than 14,000 store managers and leaders from across North America to hear from corporate executives about the "Back to Starbucks" plan. Attendees were also treated to a private Bruno Mars concert. Operating margin in the third quarter contracted 650 basis points to 10.1% from the prior year, owing to higher spending tied to the business turnaround, additional labor hours and the leadership meet. "While there is still work to be done, the company's labor investments appear to be making a difference in peak-hour throughput," said R.J. Hottovy, head of analytical research at Starbucks has been exploring options such as strategic partnerships and joint ventures for its China business, which was valued at up to $10 billion, according to media reports earlier this month. Executives said on Tuesday that the company had received significant interest from more than 20 interested parties and was evaluating its options as it aimed to retain a "meaningful stake" in the business.
Reuters
2 hours ago
- Business
- Reuters
Starbucks CEO backs brand reset as turnaround efforts drive sales beat
July 29 (Reuters) - Starbucks (SBUX.O), opens new tab reported better-than-expected revenue rise for the third quarter, as demand in China improved while investments in labor and store operations, and changes to the menu helped it offset slowing consumer spending in its domestic market. The Seattle-based company's shares rose 3.6% to $96.33 in extended trading on Tuesday. After several quarters of falling sales, the coffee chain is in the midst of a "Back to Starbucks" initiative - a major brand reset - under CEO Brian Niccol. Since taking the top job in August, Niccol has pushed for a simplified menu, freshly baked food, cups with handwritten messages and quicker service. Niccol spoke expansively on Starbucks' turnaround efforts on Tuesday's post-earnings call, saying they were "ahead of expectations." He laid out examples of what was changing at stores and in customer experience. He said he wanted to change the "feel" of stores with "greater texture, warmth and layered design," and replace thousands of seats that were removed in recent years. By the end of 2026, at least 1,000 stores across North America will be upgraded, Niccol said. Starbucks is also piloting a new, lower-cost "coffee house of the future" design, featuring 32 seats and a drive-thru opening in 2026, along with a small-format version debuting soon in New York City. Niccol has pledged to increase investments in staffing in all 10,000-plus Starbucks-owned U.S. stores by the end of the summer. The company said it would invest over half a billion dollars of additional labor hours into its U.S. company-operated stores over the next year. Starbucks' net revenue rose 3.8% to $9.46 billion, beating analysts' estimate of $9.31 billion, although its overall same-store sales fell 2% for the quarter ended June 29, its sixth straight quarterly contraction. Analysts on average had estimated a 1.19% dip, according to data compiled by LSEG. In its largest North America market, the drop in quarterly same-store sales was flat at 2%. China comparable store sales increased 2%, compared with no growth in the second quarter. Intense competition from local rivals like Luckin Coffee and Cotti Coffee and increasingly frugal consumers prompted Starbucks to cut prices on select iced drinks by an average of 5 yuan last month. "The report came in less worse than expected, given some strength in China, but it remains a turnaround story," said Dave Wagner, portfolio manager at Aptus Capital Advisors. The company reported a profit of 50 cents per share on an adjusted basis, missing estimates of 65 cents. That excluded an 11 cent per share hit, partly from a leadership meet in Las Vegas earlier this year, when the company flew and housed more than 14,000 store managers and leaders from across North America to hear from corporate executives about the "Back to Starbucks" plan. Attendees were also treated to a private Bruno Mars concert. Operating margin in the third quarter contracted 650 basis points to 10.1% from the prior year, owing to higher spending tied to the business turnaround, additional labor hours and the leadership meet. "While there is still work to be done, the company's labor investments appear to be making a difference in peak-hour throughput," said R.J. Hottovy, head of analytical research at Starbucks has been exploring options such as strategic partnerships and joint ventures for its China business, which was valued at up to $10 billion, according to media reports earlier this month. Executives said on Tuesday that the company had received significant interest from more than 20 interested parties and was evaluating its options as it aimed to retain a "meaningful stake" in the business.
