By Juveria Tabassum
(Reuters) – Starbucks is set to report its fourth straight quarter of comparable sales decline on Tuesday, in what could be another blow to investors waiting for new chief Brian Niccol’s efforts to turn the tables for the struggling coffee chain.
Niccol, who is four months into his new role at Starbucks, has set forth a raft of measures to improve the coffee chain’s business, which has taken a hit from increased competition and weakening demand in the U.S. and China.
The company in October suspended forecast for its fiscal year 2025, as it executes Niccol’s strategy that includes lowering wait times and implementing a “coffeehouse code of conduct” that will require customers to make purchases if they wish to use the restrooms or log-on to in-store Wi-Fi.
Earlier this month, Starbucks also said it would cut some jobs and reduce the extra layers of management to focus on improving in-store operations by increasing store hours to meet Niccol’s target of wait times of less than four minutes.
“A key debate among investors is whether the customer and employee experience can be improved in a matter of quarters or years. We are in the former camp and have been encouraged by the initial changes,” Stifel analyst Chris O’Cull said, suggesting that Starbucks can revive traffic in a matter of a few quarters.
Although, this quarter may not be the one where the company sees the desired results. Starbucks is expected to post a 4.6% fall in comparable store in first-quarter sales, while profit is set to slump about 26%, its fourth straight quarter of declines, according to estimates compiled by LSEG.
“We think management will continue to focus on consumer experience over near-term margins where it may be multiple quarters before they feel comfortable pulling back on hours,” RBC Capital Markets analyst Logan Reich said.
The company is also pausing price hikes this year, even as the cost of coffee soars, which could weigh on the company’s margins.
In 2024, Starbucks’ shares were down about 20% up until Niccol’s appointment, since then they have jumped 28% as of Friday’s close.
(Reporting by Juveria Tabassum in Bengaluru; Editing by Shinjini Ganguli)
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