New Starbucks CEO Brian Niccol has promised to make changes to the company as sales struggle in its two largest markets, affecting global sales this year.
Starbucks reported a 7 percent decline in global comparable sales for the fourth quarter, even though the average transaction amount increased by 2 percent. This announcement was made after trading ended on Wednesday, following a preliminary report released last week that pushed back the company’s 2025 outlook.
“Our financial results are very disappointing, and we clearly need to change our strategy to win back customers and return to growth,” Mr. Niccol said during a call discussing earnings.
The biggest impact on Starbucks comes from declines in its two largest markets: the US and China. These locations account for 61 percent of Starbucks’ global stores, with nearly 17,000 shops in the US alone.
The company faces various challenges, such as high prices for drinks, complicated orders, long wait times, and limited staff at its stores. Comparable sales in North America and the US fell by 6 percent.
As part of a broader plan to simplify its menu, Starbucks announced on Tuesday that it would remove its olive oil-infused drinks less than a year after they were introduced.
Mr. Niccol also stated that Starbucks will stop charging extra for dairy alternatives in drinks at North American cafes starting this holiday season.
In China, Starbucks faces increased competition, where comparable sales dropped 14 percent in the fourth quarter.
For the entire fiscal year, same-store sales decreased by 2 percent. International and comparable store sales in China fell by 4 percent and 8 percent, respectively.
Starbucks is discontinuing its oil-infused drink line as part of its menu simplification efforts.
Mr. Niccol mentioned that the company is implementing four strategic changes, including decluttering its menu. He aims to revive the “third place” experience after a significant shift toward drive-through orders, increase staffing levels, and streamline mobile ordering, while also bringing back its coffee condiment bar.
He recognized that the company had focused too much on its rewards customers.
“Everything I have seen and heard shows we have strong strengths to build on,” Mr. Niccol stated during the earnings call.
Starbucks brought him in from Chipotle this year to help turn around its declining sales.
