Starbucks to Kick Out People Who Aren’t Customers

After decades during which people who did not buy items at Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) could use its stores to meet or as a means to gather with friends won’t be able to do that anymore. The huge coffee chain will make these people buy items or leave. Management believes, among other things, this is a way to add customers at its locations.

According to The Wall Street Journal, “Starbucks this month is rolling out a new code of conduct at its cafes across North America, aiming to improve guests’ and staff’s safety and experience.” One reason given was customer safety. The plan is to keep out people who might bother customers via harassment or people who actively smoke or drink. However, it is also leverage. Starbucks owns the stores, so why should it allow people to use its facilities for free? Baristas are supposed to enforce the policy.

Pleasing Impatient Investors

Starbucks has bigger problems.

The decision may also be an attempt to drive up store sales. New CEO Brian Niccol has found that investors are impatient. Starbucks stock rose after he was appointed. However, the stock has plateaued and is higher by only 2% in the past year, while the market is 22% higher.

Niccol has made several moves, including his broad plans to fix the major problems at the string of coffee shops. He published an “open letter” to customers, employees, and shareholders in September. Ironically, among his plans was to “Reestablish Starbucks as the community coffeehouse.” It is impossible to say whether blocking people who are not customers is part of this.

Investors are looking for a rapid turnaround of the company. After decades of growth, its sales have started to drop. In the most recent quarter, comparable store sales declined 6% in North America and 7% worldwide. Global revenue dropped 3% to $9.1 billion during the period, compared to the same quarter a year ago. Per-share earnings of $0.80 were 25% lower.

The company’s largest problem will not be solved by its new customer store plan in North America. Sales in China, its second-largest market, are in deep trouble. In the most recently reported quarter, comparable store sales pulled back 14%. China has 7,596 Starbucks locations of the 40,199 global total. One school of thought is that this China erosion is due to a local coffee store company. Luckin Coffee has 21,343 locations and continues to grow rapidly.

The new customer policy at Starbucks in North America may help it gain customers who want to use its store facilities. It will not address the company’s larger problems.

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