In his first quarterly earnings call with Wall Street analysts as Starbucks CEO on Wednesday night, Brian Niccol offered investors and employees alike something they’ve long been longing for: clarity and decisiveness.
The last few years have been bumpy ones for the coffee-store chain. The company has been through four CEOs since 2022, and has jumped between different strategies. The result is often-chaotic store operations, three consecutive quarters of declining same-store sales, and a brand gone adrift. Niccol, who turned around Chipotle Mexican Grill before joining Starbucks, was hired away from the burrito chain in August to arrest Starbucks’ decline. Wall Street was so relieved at the news that shares of the coffee company shot up 24% the day his new role was announced.
While Niccol had already teased some elements of his strategy and leadership style over the past few days, he outlined his “Back to Starbucks” plan in detail on the earnings call. And even more important, he cut a figure as a decisive CEO who knows how to communicate a path forward.
“It is clear we need to fundamentally change our strategy to win back customers and return to growth,” Niccol told Wall Street analysts.
The CEO announced a number of additional initiatives aimed at returning Starbucks to the basics of its business, reversing moves that had slowed operations and frustrated patrons. Among these are returning self-service stations with milk and sugar to its thousands of U.S. cafés beginning in 2025 so customers can choose how much to put in their drink rather than ask a barista. Starbucks will no longer charge customers extra for nondairy milk alternatives. And Niccol mentioned cutting down the complex menu and bringing “common-sense guardrails” to mobile orders.
Niccol showed that kind of quick action and decisiveness at Chipotle in 2018, when he was brought in to help it recover from a devastating food safety crisis made worse by top management. Wall Street analysts expressed relief to see those qualities on display again during the Starbucks call.
The new CEO’s approached provided “a clear and detailed vision for the future, and aspirational, like the Starbucks brand when at its best,” Morgan Stanley wrote in a note, according to Investing.com. Niccol’s performance also won him some kudos from Stifel, whose analysts wrote that Niccol “delivered his message with a level of clarity and precision that is typically the hallmark of a talented leader.”
The focus on returning to a “welcoming coffee house,” and a clarity about that vision, is exactly what Starbucks employees and customers alike need after an extended period of tumult. For years, Starbucks touted its stores as a “third place,” apart from the home or the office, where customers could go and relax. But a few years ago, it decided to focus on turning stores into mobile order hubs as well. Along with creating chaotic pick-up traffic at peak times, it also made Starbucks’ products feel more like a commodity than an experience, and shrank the size of some stores.
Even Howard Schultz, the man who turned Starbucks from a single coffee store in Seattle’s Pike Market into a global behemoth, said earlier this year that the “the shine was off the brand.” It didn’t help that Schultz, who initially retired in 2000 but later come back twice to serve as CEO, undermined his handpicked successor, Laxman Narasimhan, with a critical post on LinkedIn. Schultz also antagonized store workers during a time of tense relations between the company and employees during his third stint as CEO.
So far, the one area where Niccol has invited scrutiny is related to the company’s return-to-office policy. Starbucks employees will be required to work in person three days a week starting next year, or risk termination. But the new CEO has permission to remain based in Southern California rather than move to Seattle, where Starbucks is headquartered. When asked for comment, Starbucks told Fortune that Niccol will be traveling a lot across the U.S. and internationally to visit stores and suppliers overseas, and will also be in Seattle for much of the time. However true that may be, it creates the appearance of a double standard that could undermine some of his efforts.
Still, after all the Sturm und Drang surrounding Starbucks in the last few years, the best favor a CEO could do for the company and its troops is to be clear and articulate the way forward.
“We have to make it easier for our customers to get a cup of coffee,” Niccol said on the earnings call. That’s exactly the kind of simplicity and plain speaking that all stakeholders need.
This story was originally featured on Fortune.com
Source: finance.yahoo.com