Brian Niccol has been Starbucks Corp. (NASDAQ: SBUX) CEO for a year. He recently said the coffee store chain would soon be a “world-class customer service” company. He has come nowhere close to that, if his changes and Starbucks earnings are any measure. Niccol claims the company is well along this path, based on feedback from employees and customers. He didn’t offer any solid proof.
Over the past year, Starbucks stock is down 13%, while the S&P 500 is 18% higher.
Niccol has tried several new tactics to bring customers back and make Starbucks a neighborhood place again. He has reduced the menu, which should help speed up service. Baristas now put notes on cups when they give them to customers. He is in the midst of remodeling some stores. He says he has increased staffing at stores to improve service. And Starbucks baristas have a new dress code.
Niccol has also set a mandate that office workers be in their offices four days a week. He has fired 1,100 management people to make Starbucks “leaner and more focused.”
Niccol’s efforts have not gotten revenue growth back on track or reversed a decline in comparable store sales. In the most recent quarter, revenue was up 3.8% to $9.5 billion. Earnings dropped 47.3% to $0.49 per share. Comparable store sales dropped 2% worldwide. Niccol’s “Back to Starbucks” plan had not taken hold. The next litmus test is whether there is a sharp increase across all these numbers when Starbucks puts out its next quarterly results.
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Niccol says one of his goals is to have as many as 30,000 stores in China. Today, there are about 8,000. Luckin Coffee has challenged the company in China. The local chain has more stores there than Starbucks has and is growing quickly.
In the United States, Niccol has to prove people will come back to his stores, particularly when consumer spending is shaky because of a choppy economy. Unless he can hit his long list of goals, he can forget about a turnaround in Starbucks stock.
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