Starbucks (SBUX.US) CEO plans to take several steps to improve the company's performance and refocus on its coffee business.
1min read Starbucks (SBUX.US) investors should brace for a number of changes as new CEO Brian Niccol plans to improve the company's performance.
"Clearly, we need to fundamentally change our strategy to win back our customers," Niccol said on Wednesday when the company reported its fourth-quarter final results.
Starbucks disappointed in the quarter, but investors were already aware of the results, as the company had unexpectedly released preliminary results last week, which matched the final results.
The company reported adjusted earnings per share of $0.80, far below the previous estimate of $1.03; and revenue of $9.1bn, below the expected $9.38bn. Same-store sales fell 7%, hurt by declining demand in North America and China, Starbucks' two biggest markets.
Starbucks suspended its earnings guidance as the first step in planning a new direction under Niccol. At the same time, the company announced a 7% increase in its dividend, in an attempt to show the board's confidence in the company's long-term growth.
Starbucks' shares have risen about 0.9% since the profit forecast was released, closing at $78.50 on Wednesday, outperforming the 0.7% decline in the S&P 500, indicating investors are optimistic about Niccol's ability to turn around the company.
Investors are now focused on Niccol and other executives' discussion of the turnaround plan in the earnings call. In a video accompanying the preliminary results, Niccol mentioned several areas the company wants to improve, including simplifying the menu, adjusting marketing strategy, optimising mobile orders, repositioning stores and refocusing on coffee, reducing reliance on other products.
Some analysts warned that Niccol may not reveal many details in the near term. Andrew Charles, analyst at TD Cowen, wrote in a report after the announcement: "We still believe the timing for a strategic plan announcement is early 2025 and believe the cancellation of the 2025 guidance is reasonable. First, Starbucks needs more time to develop the plan and assess its impact on long-term finances; second, we also believed 2025 was a key foundational year for Niccol to explore and improve traffic in the US."
