Starbucks CEO hails positive progress on turnaround strategy

Starbucks currently operates more than 40,500 stores across 88 markets globally | Photo credit: TR

Starbucks has hailed positive progress on its strategy to reinvigorate sales in its largest markets, the US and China.  
 

Reporting on the three months ended 29 December 2024, the Seattle-based coffee chain posted total net revenues of $9.4bn, up $3m on the previous quarter, but still flat compared to the same period a year ago. 

In the US, Starbucks’ largest market globally with 17,049 stores, CEO Brian Niccol has pledged to re-establish Starbucks as the ‘community coffeehouse’, setting a goal for baristas to serve in-store customers ‘in four minutes or less’ by reducing menu complexity, customisation options and promotions. 

Indicating the ‘Back to Starbucks’ strategy is beginning to yield positive results, US revenue decline slowed to 1% year-on-year compared to a 6% decline in the previous quarter.  

Like-for-like sales and comparable transactions also showed improvement, declining 4% and 8% respectively, compared to 6% and 10% in the fourth quarter. The coffee chain also opened 108 net new US outlets during the first quarter. 

“While we’re only one quarter into our turnaround, we’re moving quickly to act on the ‘Back to Starbucks’ efforts and we’ve seen a positive response. We believe this is the fundamental change in strategy needed to solve our underlying issues, restore confidence in our brand and return the business to sustainable, long-term growth,” Niccol said. 
 

On an earnings call, Niccol said US stores had seen a shift towards coffee and espresso-based beverages and 40% fewer discounted transactions year-on-year during the quarter. 

Starbucks is also planning to cut its US menu by 30% over the next 12 months in a bid to ‘bring to market fewer better-quality beverage and food offerings that reflect our premium positioning’. 

Improving US sales will be welcome news for Niccol, who has been tasked with reinvigorating the world’s largest coffee chain amid slowed growth in the US and globally. Nevertheless, Starbucks continues to face a challenging trading environment globally amid strong competition and the high cost of living in many markets.  

International like-for-like sales fell 4%, driven by a 2% decline in both average ticket and comparable transactions. Like-for-like sales in China – Starbucks’ second largest market globally with 7,686 stores – fell 6%, with average ticket declining 4% and comparable transactions down 2%. However, Starbucks’ net revenues in China grew 1% year-on-year to $743.6m with the chain’s like-for-like sales decline considerably narrower than the 14% fall reported in the fourth quarter.  

China is crucial growth market for Starbucks, which recently appointed a new sole CEO, appointed its first Chief Growth Officer and is actively exploring strategic partnership opportunities to spur outlet growth amid heightened competition from low-cost domestic competitors, Luckin Coffee and Cotti Coffee. 

Founded in 1971, Starbucks currently operates more than 40,500 stores across 88 markets after opening 377 net new stores globally in the first quarter.