New Starbucks (NASDAQ: SBUX) CEO Brian Niccol says he has started a Starbucks recovery. Quarterly same store sales and revenue will start to go up again, he says. He made a decision recently that puts what was already a faltering plan to improve even more off course. Niccol has told store workers that they have to wear a “uniform.” Some workers walked out. This can’t be lost on customers, both in terms of whether they do business with the coffee store chain, or develop sympathy with the workers.
Starbucks’ most recent quarter shows Niccol has been overly optimistic. Comparable store sales dropped 1%. Revenue rose 3.3% to $8.76 billion. EPS fell 50% to $.34.
Niccol had made several changes to Starbucks operations. He fired over 1,000 corporate workers. He said he had a plan to speed up how quickly customers got their orders. This has been a problem in the past. He cut the number of items on the menu. People need to buy something to use the bathroom.
For employees, the primary issue appears to be that they have a limited number of clothing items they can wear while at work. They have to wear the “iconic” green apron. Starbucks described this. “The more defined color palette includes any solid black short and long-sleeved crewneck, collared, or button-up shirts and any shade of khaki, black, or blue denim bottoms.” Starbucks said it would give two shirts at no cost.
It is worth noting, Starbucks already has labor problems and has had for years. Retired CEO Howard Schultz acted unlawfully, according to the National Labor Relations Board, because he had tangled with unions that were trying to get employees better work conditions. The SBWU has united over 570 stores and 11,000 plus workers. This is a tiny fraction of Starbucks totals in both categories.
Starbucks’ more serious problem is the reaction of the new uniforms which has caused some workers to walk off their jobs. According to The New York Times, “Since May 11, more than 2,000 baristas at more than 100 stores, including in Wisconsin, Florida and Pennsylvania, have walked out “to protest the company’s failure to prioritize real support for baristas,” the union said on Friday.”
As is always the case with work stoppages, the number of workers who leave and how long they stay out determines the effect on the company. Additionally, there is the issue of public sympathy. Starbucks recovery could be dented by either.
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