Starbucks profits fall but points to progress in turnaround

Starbucks, led by new CEO Brian Niccol, is introducing various new pilot programs to reinvigorate sagging sales at the chain coffee shop. Photo: ANGELA WEISS / AFP
Source: AFP

Starbucks reported lower profits Tuesday in results that still topped expectations as the company's new CEO described various pilot program tests to reinvigorate the chain.

Profits came in at $780.8 million, down 23.8 percent from the year-ago level. Revenues declined 0.3 percent to $9.4 billion, as comparable store sales fell in both North America and international markets.

The chain, which has hit a rough patch of sagging sales, installed Brian Niccol as CEO last year, recruiting him from Chipotle after the short-lived tenure of Laxman Narasimhan.

Niccol has reinstated self-service condiment bars for customers in US stores and shifted policies to permit bathroom use only to patrons.

On Tuesday, prior to the earnings announcement, Starbucks announced the departure of two longtime executives, Sara Trilling and Arthur Valdez, whose roles will be reconfigured under a new operating model.

Niccol's goal is that Starbucks "gets back" to its identity as "a welcoming coffee house where people gather and where we serve the finest coffee handcrafted by our skilled baristas."

The chain is working to ensure that customers are moved through and served within four minutes with a "touch of humanity," Niccol said on a conference call with analysts.

To that end, the company has reintroduced ceramic mugs and handwritten notes to customers on coffee cups.

Starbucks is also experimenting with algorithms that can improve efficiency in the production of drinks ordered through the company's smartphone app, Niccol said.

Customers have complained of lengthy wait times for online orders where they stand near rows of prepared drinks waiting for other customers.

"Right now mobile ordering is just a first in, first out proposition and we've got to fix it," he said, adding that fixing the issue will take "the brand right back where it needs to be, which is a premium experience."

Shares rose 0.6 percent in after-hours trading.

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Source: AFP