SEATTLE — Starbucks chief executive officer Brian Niccol brushed off weak second-quarter results in an April 29 conference call with securities analysts to promote the progress he said the company has made since he took over in September 2024.
“These results are far below our capability, but I believe they will be temporary because there is so much opportunity in front of us,” he said. “I also believe there are better measures than EPS (earnings per share) right now to track the progress we’re making to turn around the business.
“We have started to make disciplined investments across the four pillars of our ‘back to Starbucks’ plan in partners, coffeehouses, the customer experience, and our marketing and menu.”
Items specifically identified by Niccol include improved employee engagement and the company’s turnover rate in North America dropping below 50%; more comfortable seats in stores and a new free refill policy; and a shift from beverage production to “craft and connection.”
“We’re finding through our work that investments in labor rather than equipment are more effective at improving throughput and driving transaction growth,” he said.
Currently, the focus on craft and connection is coming at the expense of food.
Non-Starbucks Rewards traffic stabilized during the quarter, according to the company.
| Photo: ©FELLOWNEKO – STOCK.ADOBE.COM“… We’ve continued to rationalize and update our product lineup to focus on coffee and craft,” he said. “And to create room for relevant innovation that drives demand.”
The timing of when such innovation will be introduced remains vague, but Niccol added, “Work is underway to craft artisanal food, including the exploration of ways to freshly bake, assemble, and serve certain items in our cafes at scale. We’re using learnings from the launch of freshly baked and prepared items in the UK and other international markets to inform our test-and-scale approach in the US.
“Next, we’re exploring how to lead in health and wellness with a new platform that resonates across demographics, which we expect to launch later this year.”
Net income for the quarter ended March 30 fell 50% to $384 million, equal to 34¢ per share on the common stock, from $772 million, or 68¢ per share, during the second quarter of fiscal 2024.
Quarterly sales rose 2% to $8.8 billion from $8.4 billion the year before. Contributing to the sales increase were new company-operated stores that opened during the quarter.
In the United States, comparable store sales fell 2% and transactions were down 4% compared to the year before.
“While transactions are not where we expect them to be, we are seeing several indicators that our back to Starbucks strategy is positioning the business on the right track,” said Cathy Smith, chief financial officer. “In the US, market share, brand sentiment, and customer contacts regarding wait times are all improving. We saw stabilization in our non-Starbucks Rewards member traffic, indicating our broad-based marketing campaign to reintroduce Starbucks to the world is resonating with our customers.”
Average tickets rose 3%, Smith said.
“We are driving more durable growth by moving away from highly discounted offers, building the foundation of a healthier-based business to grow from,” she said.
