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Starbucks's new CEO, Brian Niccol, has been making news for his work-from-home setup and early list of priorities. However, after Starbucks surprised investors and analysts with its preliminary earnings report Tuesday evening, commuting by private jet may be the least of Niccol's worries.
Starbucks revealed a decline in sales in the U.S. and China that led to a year-over-year sales drop for the third quarter in a row, ending on September 29. Now, the company will suspend its financial guidance for the rest of the year, Starbucks announced in a press release.
"Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top-line and bottom-line," Starbucks Chief Financial Officer Rachel Ruggeri said in the release.
Niccol said that the report "makes it clear" that the company needs "to fundamentally change our strategy so we can get back to growth."
"People love Starbucks, but I've heard from some customers that we've drifted from our core, that we've made it harder to be a customer than it should be, and that we've stopped communicating with them," Niccol said in a video message. "As a result, some are visiting less often, and I think today's results tell that same story."
Niccol left his chief executive role at Chipotle to join the coffee chain and will reportedly earn over $113 million in his first year, including bonus and stock incentives.
Photo by Muhammet Zeyd Karaaslan/Anadolu via Getty Images
Niccol also noted that immediate changes were taking place, including simplifying "our overly complex menu" and fixing our "pricing architecture." The company has already changed some of its marketing with TikTok-friendly ASMR ads featuring sounds of coffee-making.
"Starbucks has always been a place where people come together," Niccol said. "We are revisiting our stores to make sure we're offering the amenities you'd expect in a community coffeehouse."
Starbucks' full earnings report is set to be released on October 30.
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