Latest news with #BackToStarbucks
Zawya
3 days ago
- Business
- Zawya
Nine months in, Starbucks CEO faces tall order in turnaround
Starbucks CEO Brian Niccol earned a reputation on Wall Street as a miracle worker for wounded restaurant brands like Taco Bell and Chipotle. Nine months into his Starbucks tenure, investors are unsure if lightning will strike a third time. Shares jumped more than 21% on August 13, the day Niccol was named CEO, on hopes he would inject the company with new vitality after several quarters of falling sales and pressure from activist investor Elliott Investment Management. But demand has not yet reversed, Niccol has not shared any financial targets, and the stock remains sluggish. Starbucks shares closed up 0.3% on Wednesday. Niccol's "Back to Starbucks" initiative emphasizes a simplified menu, freshly baked goods, cups with handwritten messages, and speedier service. "The experience of the coffeehouse defines our brand," Niccol told an audience of 14,000 store managers and leaders at a packed Las Vegas stadium in June. He said the company's previous removal of around 30,000 seats in stores as it prioritized mobile orders hurt the business and would be reversed. Starbucks' global same-store sales declined 1% for the quarter ending March 30, the fifth straight quarterly contraction. Analysis from research firm shows regular customers are coming in less often than before Niccol took over, said RJ Hottovy, head of analytical research. A Reuters review of the company's analysis derived from tens of millions of cell phone location points shows average monthly visit frequency has declined in every month of 2025 compared to 2024. The average customer visited 2.4 times in February, compared to 2.48 last February. Even a small decrease spread over millions of visitors is meaningful, said. 'You have to win that trust back,' Hottovy said. Starbucks did not comment on analysis. 'RESULTS WILL FOLLOW' Niccol is accelerating staffing increases to all 10,000-plus Starbucks-owned U.S. stores by the end of the summer, rather than to just a third of U.S. stores, and he describes his changes as "cleaning up some things that have been done in the past while investing in what I think needs to happen,' he told Reuters in Las Vegas. 'The earnings results will follow.' Staffing increases will vary by store, with details to be revealed at an investor day 'at some point in 2026." The lack of clarity is making investors hesitant. Shares have stagnated since his August 13 appointment, while the broad-market S&P 500 is up 15%. The stock's forward price-to-earnings ratio is 33.2, a higher valuation than McDonald's or Yum Brands. Dan Ahrens, portfolio manager of AdvisorShares Restaurant ETF, said his fund is currently avoiding Starbucks because of the uncertainty around the turnaround. "We're in a 'show-me' stage," he said. When Niccol started on September 9, a narrow majority of analysts recommended buying Starbucks stock. Now, more recommend holding or selling. TD Cowen analyst Andrew Charles downgraded shares to 'hold" on May 29, expecting fiscal 2026 earnings to fall short of Wall Street's consensus. "What the Street is trying to figure out is, what's the lift in sales I'm going to get from this?" he said. Bernstein analysts said on July 2 that the staffing surge will cost $1.5 billion to $2 billion in the next two years, but it expects it to reduce turnover and improve same-store sales. TURNAROUND ARTIST Greg Flynn, a restaurant franchisee whose company owns more than 300 Taco Bells, said Niccol 'gets the credit for turning that momentum forward with a relentless parade of new product innovations and exceptional advertising and promotion' as Taco Bell CEO from 2015 to 2018. At Chipotle, same-store sales rose from 2.2% year-over-year in March 2018 when he took over to 31% roughly three years later. Flynn said 'Back to Starbucks' follows that playbook. 'Figure out what people really loved about your brand from the beginning and embrace that,' he said. 'It takes discipline, it takes expenses, and it always meets a lot of opposition.' There are critics in Starbucks' union, Starbucks Workers United, which represents workers at more than 600 locations. Unionized baristas staged walk-outs at dozens of stores in June to protest new dress code restrictions Niccol introduced. Michelle Eisen, a 15-year Starbucks barista who now works for the union full-time, criticized moves such as requiring visitors to pay to use the restrooms or get water, 'neither of which promote a welcoming coffeehouse atmosphere.' Starbucks said changes to its policies came out of discussions with employees and customers. One notable Niccol fan? Former CEO Howard Schultz, who has a history of criticizing those who succeeded him. He physically embraced Niccol on stage in Las Vegas. 'I have never, in my entire life at Starbucks, been more optimistic than I am today,' he said. (Reporting by Waylon Cunningham, Editing by Nick Zieminski)
Reuters
4 days ago
- Business
- Reuters
Nine months in, Starbucks CEO faces tall order in turnaround
July 9 (Reuters) - Starbucks CEO Brian Niccol earned a reputation on Wall Street as a miracle worker for wounded restaurant brands like Taco Bell and Chipotle. Nine months into his Starbucks tenure, investors are unsure if lightning will strike a third time. Shares jumped more than 21% on August 13, the day Niccol was named CEO, on hopes he would inject the company with new vitality after several quarters of falling sales and pressure from activist investor Elliott Investment Management. But demand has not yet reversed, Niccol has not shared any financial targets, and the stock remains sluggish. Niccol's "Back to Starbucks" initiative emphasizes a simplified menu, freshly baked goods, ceramic mugs with handwritten messages, and speedier service. "The experience of the coffeehouse defines our brand," Niccol told an audience of 14,000 store managers and leaders at a packed Las Vegas stadium in June. He said the company's previous removal of around 30,000 seats in stores as it prioritized mobile orders hurt the business and would be reversed. Starbucks' global same-store sales declined 1% for the quarter ending March 30, the fifth straight quarterly contraction. Analysis from research firm shows regular customers are coming in less often than before Niccol took over, said RJ Hottovy, head of analytical research. A Reuters review of the company's analysis derived from tens of millions of cell phone location points shows average monthly visits have declined in every month of 2025 compared to 2024. The average customer visited 2.4 times in February, compared to 2.48 last February. Even a small decrease spread over millions of visitors is meaningful, said. 'You have to win that trust back,' Hottovy said. Starbucks did not comment on analysis. Niccol is accelerating staffing increases to all 11,000-plus Starbucks-owned North American stores by the end of the summer, rather than to just a third of U.S. stores, and he describes his changes as "cleaning up some things that have been done in the past while investing in what I think needs to happen,' he told Reuters in Las Vegas. 'The earnings results will follow.' Staffing increases will vary by store, with details to be revealed at an investor day 'at some point in 2026." The lack of clarity is making investors hesitant. Shares have stagnated since his August 13 appointment, while the broad-market S&P 500 is up 15%. The stock's forward price-to-earnings ratio is 33.2, a higher valuation than McDonald's (MCD.N), opens new tab or Yum Brands (YUM.N), opens new tab. Dan Ahrens, chief executive at AdvisorShares, said his fund is currently avoiding Starbucks because of the uncertainty around the turnaround. "We're in a 'show-me' stage," he said. When Niccol started on September 9, a narrow majority of analysts recommended buying Starbucks stock. Now, more recommend holding or selling. TD Cowen analyst Andrew Charles downgraded shares to 'hold" on May 29, expecting fiscal 2026 earnings to fall short of Wall Street's consensus. "What the Street is trying to figure out is, what's the lift in sales I'm going to get from this?" he said. Bernstein analysts said on July 2 that the staffing surge will cost $1.5 billion to $2 billion in the next two years, but it expects it to reduce turnover and improve same-store sales. Greg Flynn, a restaurant franchisee whose company owns more than 300 Taco Bells, said Niccol 'gets the credit for turning that momentum forward with a relentless parade of new product innovations and exceptional advertising and promotion' as Taco Bell CEO from 2015 to 2018. At Chipotle, same-store sales rose from 2.2% year-over-year in March 2018 when he took over to 31% roughly three years later. Flynn said 'Back to Starbucks' follows that playbook. 'Figure out what people really loved about your brand from the beginning and embrace that,' he said. 'It takes discipline, it takes expenses, and it always meets a lot of opposition.' There are critics in Starbucks' union, Starbucks Workers United, which represents workers at more than 600 locations. Unionized baristas staged walk-outs at dozens of stores in June to protest new dress code restrictions Niccol introduced. Michelle Eisen, a 15-year Starbucks barista who now works for the union full-time, criticized moves such as requiring visitors to pay to use the restrooms or get water, 'neither of which promote a welcoming coffeehouse atmosphere.' Starbucks said changes to its policies came out of discussions with employees and customers. One notable Niccol fan? Former CEO Howard Schultz, who has a history of criticizing those who succeeded him. He physically embraced Niccol on stage in Las Vegas. 'I have never, in my entire life at Starbucks, been more optimistic than I am today,' he said.
Yahoo
6 days ago
- Business
- Yahoo
Starbucks is pioneering the ‘coffeehouse of the future' with comfy chairs and couches as its CEO pushes to reimagines stores
is introducing premium features, including comfortable couches, warm lighting, and revamped wall art in redesigned stores starting in New York and Southern California. The changes align with CEO Brian Niccol's 'Back to Starbucks' plan, which aims to get customers to stick around locations longer, including by adding ceramic mugs for some in-house orders and bringing back the condiment bar in U.S. locations. CEO Brian Niccol has pushed for Starbucks to be more inviting to customers, and now some of its locations are seeing major changes aligned with his vision. Starting in New York and Southern California, Starbucks is enhancing its stores with premium features aimed at cultivating a 'coffeehouse vibe,' as part of Niccol's Back to Starbucks plan. Among the changes, Starbucks is adding cozier seating, warmer lighting, and locally inspired art to try to give each redesigned location more of a unique feel. At a Bridgehampton, NY, location that is among the first to be remodeled, cozy chairs and couches, accentuated by dark, Starbucks-themed green walls and hardwood floors give the location a distinct look. A redesigned store in East Hampton, NY also stands out for its wall art paying homage to the town's seaside location and nautical roots. The redesigned Starbucks locations are part of Niccol's plan to make Starbucks a place where customers want to spend time. Apart from the redesigns, some of the changes include offering ceramic mugs for some in-house orders, as well as bringing back the condiment bar for customers to add their own milk and sugar to drinks. The company is also instructing its baristas to warmly acknowledge customers, to help them feel welcome. Starbucks has also made big strategic changes to improve efficiency, including cutting down on its extensive food and drink menu and doing away with some options for drink customizations. A new order sequencing algorithm piloted during the first quarter has also helped the company reduce wait times, with three-quarter of orders at test locations arriving in under four minutes at peak. The big changes Niccol has spearheaded have drawn praise from Starbucks founder Howard Schultz, who said he 'did a cartwheel' after hearing about the CEO's Back to Starbucks plan. Still, the changes have yet to yield much in terms of financials, with the company reporting $8.8 billion for the second quarter, just below analyst expectations. Niccol said in an April note, however, that he was confident in his turnaround plan. 'We have a lot of work ahead, but we are on the right track and moving quickly,' Niccol said. This story was originally featured on
Yahoo
05-07-2025
- Business
- Yahoo
The next phase of Starbucks' turnaround plan is offering executives up to $6 million in stock grants, as baristas scrap to get annual raises above 2%
will reward company executives with up to $6 million in stock grants should they effectively fulfill cost-saving and timely rollout goals of the company's 'Back to Starbucks' turnaround strategy. Starbucks Workers United representatives dubbed the move 'ridiculous and irresponsible' amid contract negotiations over barista wages. Starbucks is sweetening the pot for executives to expedite the company's turnaround efforts, even as workers protest the company's wages for baristas. The coffee chain will give its executives up to $6 million in stock grants should they expeditiously deliver on cost-saving goals, according to documents filed Wednesday. The entirely performance-based incentive is in an effort to advance the company's 'Back to Starbucks' plan introduced by new CEO Brian Niccol to return Starbucks to its cozy, third-place roots. 'These grants are designed to motivate and retain our senior leaders to deliver on the significant transformation required by our turnaround plan,' the filing said. 'The grants are directly tied to the achievement of key components of the Back to Starbucks plan to encourage our senior leaders to achieve these goals as quickly as possible.' These goals pertain to the rollout of Starbucks' Green Apron Service program to leverage technology to expedite orders, as well as 'new food and beverage platforms' and 'a reimaged Starbucks Rewards program,' per the filing. Employees are eligible to receive the stock grants at the end of Starbuck's fiscal 2027, which ends in September 2027. While employees can unlock a payout of up to 200% of the target, they must have worked through the service date of the performance-based restricted stock units. Upon joining Starbucks as CEO in September 2024, Niccol has rolled out sweeping changes to the Seattle-based coffee chain, including a green apron dress code for baristas, human touches like hand-written order names, and a revamped hiring process to beef up store staffing. Amid slumping sales, the CEO wants to return Starbucks to its reputation of yore, when customers lingered over lattes in comfortable in-store seating. Niccol stands to make up to $113 million in his first year as CEO, including a base salary of $1.6 million, a $75 million equity grant, and $10 million in signing bonuses for sticking at the job for the first six months. Unlike those in the C-suite, Starbucks employees behind the counter are fighting for incremental increases in hourly wages. Baristas last year earned smaller pay increases in 2024—about 2% to 3%—compared to the 3% to 5% increase from years prior, Bloomberg reported in December, citing an internal document. The pullback in wages, which are not tied to performance, came amid a challenging year for Starbucks, in which it battled lower traffic and sales following boycotts and slowing service. The coffee chain pays its baristas $19 an hour on average, totalling about $30 an hour when you include benefits. Unionized Starbucks baristas have taken issue with wages as they seek to ratify a new contract with management two years after negotiations began, with Starbucks Workers United rejecting a company proposal in April guaranteeing at least a 2% pay increase annually. Starbucks did not respond to Fortune's request for comment. Executive bonuses like what Starbucks disclosed on Wednesday are another worker grievance, particularly amid contract negotiations. Jasmine Leli, a barista in Buffalo, New York, and a bargaining delegate with Starbucks Workers United, told Fortune the $6 million incentives for executives is a 'ridiculous and irresponsible step for Starbucks.' 'Starbucks cannot tell us that there is no money to put into a fair union contract for baristas when they paid Brian [Niccol] $96 million for 120 days of work in 2024 and have allocated millions upon millions for a glitzy manager conference and C-Suite bonuses,' Leli said in a statement. ''Back to Starbucks' will only succeed when baristas can thrive—and the first step is finalizing fair union contracts that lock in the staffing, hours, and protections we need to do our jobs.' Not all baristas are sold on the company's 'Back to Starbucks' strategies more broadly. More than 2,000 Starbucks baristas at 120 U.S. stores went on strike in May, arguing the new dress code was not a relevant step to improve the customer experience. 'It would be more productive if the union would put the same effort into coming back to the table that they're putting into protesting wearing black shirts to work,' Starbucks said in a statement at the time. Other workers have advocated for an easier way for stores to pause digital orders to mitigate overwhelm among baristas. Leli indicated baristas are still struggling to make drinks efficiently due to understaffing and high traffic volumes, despite Niccol's efforts to decrease wait times to just 30 seconds. 'Baristas are the most important part of the Starbucks experience,' Leli said. 'We've yet to see any progress in our demands including better staffing, guaranteed hours, improved take-home pay, and on-the-job protections.' This story was originally featured on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
04-07-2025
- Business
- Yahoo
Can Starbucks Stock Hit $108 in 2025?
In just over a year since Brian Niccol took the helm as CEO, Starbucks (SBUX) has faced increasing challenges, dimming the prospects of the company's ambitious "Back to Starbucks" initiative aimed at revitalizing growth. Launched with urgency, the plan was intended to spark renewed customer engagement and operational efficiency. But consumer behavior has shifted more than Starbucks expected. Visits remain soft, and same-store sales continue to slip. Bernstein, however, is betting on patience and precision. The firm believes Starbucks' multi-year investment in labor — estimated between $1.5 billion and $2 billion over two years — will lay the groundwork for recovery. 'It's a Miracle': Nvidia CEO Says Their New Technology Takes 'AI Supercomputing to a Whole New Level' AI Isn't Just About Nvidia: 2 Rising Stars in the Artificial Intelligence Race UnitedHealth Stock Is One of the Worst-Performing S&P 500 Stocks in 2025. Should You Buy the Dip? Get exclusive insights with the FREE Barchart Brief newsletter. Subscribe now for quick, incisive midday market analysis you won't find anywhere else. Bernstein expects North American traffic to remain negative through 2025 before improving in 2026. By 2027 to 2028, same-store sales could climb 5%, with EBIT margins reaching 19% in North America and more than 15% company-wide. The firm sees SBUX stock potentially doubling from its post-second-quarter lows, fueled by more than 20% EPS growth and a premium multiple. Even after a 15% rebound, Bernstein expects another 35% upside over the next two years. Starbucks is the world's leading roaster and retailer of specialty coffee with more than more than 38,000 stores across the globe. With a market capitalization of $107 billion, it operates under several familiar banners such as Starbucks Coffee, Teavana, Seattle's Best Coffee, and Ethos. SBUX stock's recent performance reflects renewed investor attention. Over the past 52 weeks, shares have risen 24%, including a 9% jump in just the past month. The stock trades at 38 times forward adjusted earnings and 2.9 times sales, both valuations sitting above industry averages. That reflects investor confidence in the company's future earnings power. Income-seeking investors will find further appeal in Starbucks' dividend record. The company pays an annualized forward dividend of $2.40 per share, offering a yield of 2.55%. It has raised its dividend for 14 consecutive years. The most recent payout of $0.61 per share was distributed on May 30 to shareholders of record as of May 16. Starbucks announced its fiscal 2025 Q2 results on April 29, but the report did little to inspire confidence. Revenue came in at $8.76 billion, up 2.3% year-over-year (YOY) but short of the $8.82 billion Wall Street was expecting. The same-store sales picture offered no relief, falling 1% during the quarter. The U.S. — the company's largest market — saw a 4% dip in transactions. While China managed a 4% increase in transaction volume, that was neutralized by a 4% drop in average ticket size, highlighting a shifting consumer dynamic in both markets. Starbucks made a deliberate pivot during the quarter. It scaled back on expanding cold-brewing equipment to instead pour more resources into labor, a move it believes will generate more meaningful gains in order throughput and customer experience. The decision, however, has come at a cost. Adjusted operating margin contracted sharply, down 460 basis points to 8.2%. Net income declined 50.3% YOY to $384.2 million. EPS plunged 50% YOY as well to $0.34 and failed to meet analysts' forecast of $0.48. Still, CEO Brian Niccol remains confident. Niccol called the plan the right one, not just for near-term stabilization but also for unlocking long-term opportunity. Forecasts reflect the current turbulence. Analysts expect third-quarter EPS to fall 31% YOY to $0.64. For fiscal 2025, the projection drops 25% to $2.48. A rebound is penciled in for fiscal 2026, with EPS expected to climb more than 20% to $2.99. Bernstein continues to back SBUX stock with an 'Outperform' rating and has raised its price target from $90 to $100. The firm sees strengthening visibility around Starbucks' labor initiatives, margin stabilization, and earnings recovery as catalysts that could drive long-term upside. Evercore ISI analyst David Palmer has followed suit, lifting his target price from $95 to $105. The revision reflects growing confidence in Starbucks' ability to execute through current headwinds. Both analysts align on one point: the turnaround is progressing, even if the financials have yet to fully catch up. The broader analyst community holds a 'Moderate Buy' view. Of the 32 analysts covering the stock, 15 have issued a 'Strong Buy' rating, two rate it as a 'Moderate Buy,' 12 call the stock a 'Hold," one has marked it as a 'Moderate Sell', and two classify SBUX under 'Strong Sell.' SBUX stock is already trading above its average price target of $91.50 yet still has a runway to climb. The Street-High target of $108 suggests a potential climb of 14% from current levels. On the date of publication, Aanchal Sugandh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on
