Starbucks CEO’s Turnaround Plan to “Fundamentally Change” the Business
With declining shares and sales plaguing Starbucks, the new CEO has been tasked with uncovering a turnaround plan that can decisively bring the company back to its former glory. On October 22, the coffee chain revealed its preliminary Starbucks Q4 sales report, which showed that global comparable store sales declined by 7% and its consolidated net revenue also declined by 3% to $9.1 billion. Starbucks shares fell by more than 3% in extended trading when the preliminary report was announced.
In addition, the GAAP earnings and Non-GAAP earnings per share were both found at $0.80, which is a 25% decline and 24% decline respectively compared to last year. The actual Q4 and full fiscal year financial results will be revealed on October 30, but for now, it’s evident that Starbucks needs a comprehensive sales strategy that can bring traffic back to its business.
Starbucks’ New CEO Is Looking into a Turnaround Plan to Revitalize the Business
The popularity of Starbucks has been on the decline and the coffee chain is determined to “fundamentally change” how the business functions. This has prompted conversations of limiting the investment in promotions and discounts briefly to the increased attention on building customer experience with a more premium brand offering.
As a part of the turnaround plan, Starbucks CEO Brian Niccol appears to be looking into boosting the in-store experience to encourage customers to come into their main outlets. Declining foot traffic has been identified as one of the many reasons for the company’s decline in sales.
To make this possible, the Starbucks sales strategy is going to be reoriented towards the Starbucks baristas and the service they can offer to ensure that the coffee store can be “a welcoming coffeehouse where people gather” to have the finest coffee on offer.
The Starbucks Sales Strategy Reiterates Its Focus on Addressing the Needs Of Its Staff
“We must ensure our baristas have the time and tools they need to provide exceptional customer service, and that they are supported by strong leaders and managers across every store,” Niccol said in a video released with the Starbucks Q4 sales report.
“Every person at Starbucks must work harder to support our retail teams, moving faster to respond to their feedback and get them what they need. Our green apron partners want to provide exceptional service to our customers. And as leaders, we need to remove those things that might stop them from doing that,” he added. To attract the best talent and encourage retention, the company has also committed to making “Starbucks the best job in retail” by offering benefits like the opportunity for U.S. partners to earn a free four-year college degree.
Starbucks has been at the center of unionization efforts recently, which has resulted in the Starbucks Workers United union taking shape. The presence of a union opens the doors for the company to engage with the workers collectively, but it’s unclear how the company will continue to respond to the unionization efforts as part of its strategy.
The Sales Strategy Will Also Emphasize the Improvement of the Customer Experience
Starbucks has seen a stark decline in its Q4 sales report in its primary market in North America, but the same results are also evident in its second-largest market, China, where same-store sales fell by 14%. The company has announced its decision to suspend its fiscal 2025 outlook due to the recent recruitment of the new CEO, which took place only two months ago, and the state of the business.
CEO Niccol took over the role from Michael Conway who had only held the position for five months. Conway had been appointed when Laxman Narasimhan had been ousted from his position, and this change-up has been only part of the reshuffling that has taken place among the executives at Starbucks.
Niccol had penned an open letter on taking up the CEO title, stating that he would reorient the business to focus on four areas—the barista experience, morning service, the state of the cafes, and the company’s branding.
Now, the Starbucks CEO’s turnaround plan more formally mentions its focus on refining Mobile Order and Pay for a smooth customer experience. This will also include attention to the amenities offered in-store to encourage customers to return. The business plans to shift away from only talking to the Starbucks Rewards customers and understanding the experience of its entire consumer base instead.
As part of the sales strategy, Starbucks promises to simplify its overly complex menu, fix its pricing architecture, and ensure that every customer feels Starbucks is worth it.
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