Starbucks’ sliding sales show its new CEO has his work cut out for him

Starbucks released its fourth-quarter earnings early on Tuesday.

Starbucks pre-released its earnings on Tuesday.The surprise release showed sales dropped in its key markets of the US and China.CEO Brian Niccol said he’s planning a broader turnaround of the coffee chain.

Starbucks sprung a surprise on investors on Tuesday and posted its earnings early — and the figures show that new CEO Brian Niccol has an uphill battle ahead.

The company said comparable sales fell 7% for the fourth quarter, including a 6% slump at its US stores. Sales in China declined 14% in the same period. Global sales on the same basis dropped 2% for its fiscal full year.

Starbucks also said that “given the company’s CEO transition coupled with the current state of the business,” it’s suspending its guidance for its 2025 fiscal year.

“This will allow ample opportunity to complete an assessment of the business and solidify key strategies, while stabilizing and positioning the business for long-term growth,” a press release read.

Still, it boosted its dividend from $0.57 to $0.61.

“We are developing a plan to turn around our business, but it will take time,” Rachel Ruggeri, chief financial officer, said in the release. “We want to amplify our confidence in the business, and provide some certainty as we drive our turnaround. For that reason, we have increased our dividend.”

Shares fell more than 3% in after-hours trading.

Niccol, who joined Starbucks as CEO in September, said in a video message accompanying the results that Starbucks has “drifted from our core,” according to discussions that he’s held with customers.

“As a result, some are visiting less often, and I think today’s results tell that same story,” he said.

Niccol said he would share more about his plans for the company on a call on October 30, the day results were originally scheduled for release. “We have to reintroduce Starbucks to the world,” he said.

Under Niccol, Starbucks is reportedly reversing its push to offer lots of promos on beverages and snacks to members of its rewards program through its smartphone app.

Those promos have led to backups at Starbucks locations and long wait times for some patrons, BI previously reported.

“To succeed, we need to address staffing in our stores, remove bottlenecks, and simplify things for our baristas,” Niccol said in his video message on Tuesday. “We need to refine mobile order and pay so it doesn’t overwhelm the café experience.”

Niccol added that he will focus on returning Starbucks’ US business to growth. His message also mentioned an “overly complex menu” and focusing more on all of Starbucks’ customers, not just those enrolled in its rewards program.

Starbucks appointed Niccol in August. He was previously CEO at Chipotle. At the time, analysts said he could oversee major changes at the coffee chain.

Do you work at Starbucks and have a story idea to share? Reach out to this reporter at abitter@businessinsider.com

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