The new operating model is called "Green Apron Service," according to WGN. Starbucks CEO Brian Niccol said he believes it needs to become "the world's greatest customer service company again." Niccol was at a Starbucks in suburban Chicago on Wednesday discussing the initiative, which is attempting to turn around lagging sales. "It's centered on putting enough partners on the roster in the stores and then deployed correctly so they can provide that customer connection, that experience, that frankly Starbucks ...

Core Insights - Starbucks reported a larger-than-expected decline in third-quarter global comparable sales, with same-store sales down 2%, marking the sixth consecutive quarterly contraction [1][4] - The decline was greater than analysts' average estimate of a 1.19% dip, indicating cautious consumer spending affecting demand [1] Sales Performance - Same-store sales in North America also fell by 2%, consistent with the previous year's decline [6] - Customer visits decreased by an average of 0.1% from April to June, an improvement compared to a 0.9% drop in the prior three months, suggesting early signs of recovery from the "Back to Starbucks" initiative [6] Strategic Initiatives - CEO Brian Niccol has implemented a simplified menu, introduced freshly baked food items, and emphasized quicker service as part of a brand reset since taking over in August [2] - The company plans to increase staffing investments in all 10,000-plus Starbucks-owned US stores by the end of summer [4][7] Financial Impact - CFO Cathy Smith noted that a significant non-recurring investment in the Leadership Experience 2025 and a discrete tax item negatively impacted Q3 EPS by 11 cents [5]

Core Viewpoint - Starbucks is facing challenges in adapting to a changing market, but it is working on a recovery strategy under new leadership, with potential for growth and improvement in operations [1][3][10] Group 1: Current Challenges - Starbucks has experienced leadership instability with four CEOs in four years, struggling to manage high customer demand and mobile ordering effectively [3] - The company has seen declining sales and profits, with a 2% revenue increase in the second quarter of fiscal 2025, but comparable sales down by 1% [4][5] - Operating margin and income have decreased significantly, attributed to restructuring and turnaround costs, with earnings per share dropping 50% to $0.34 [5] Group 2: Strategic Initiatives - New CEO Brian Niccol emphasizes a customer-focused approach, improving worker satisfaction, managing costs, and enhancing operations as key to success [7] - The "Back to Starbucks" strategy aims to restore the brand's identity as a community destination while modernizing its image [7] - Initiatives such as a new shift trading system and expanded refill policies have led to improved worker satisfaction and customer engagement [8] Group 3: Market Response and Future Outlook - The market responded positively to the second-quarter update, with Starbucks stock remaining elevated, despite a high forward P/E ratio of 32 [9] - The company plans to double its U.S. store count, indicating a long-term growth potential [10] - Starbucks is implementing new app features for customer convenience and has seen a 40% increase in sales by removing sugar from matcha products [11]

Financial Data and Key Metrics Changes - Total company revenue for Q2 FY2025 was $8.8 billion, reflecting a 3% increase in constant currency compared to the prior year, despite a 1% decline in comparable store sales [37][30] - Earnings per share (EPS) was $0.41, down 38% from the prior year, primarily due to expense deleverage and increased store investments [45][30] - Global operating margin was 8.2%, contracting 450 basis points from the prior year, driven by labor investments to support the Back to Starbucks strategy [43][30] Business Line Data and Key Metrics Changes - North America experienced a 2% decline in comparable store sales, with transaction declines improving to negative 4% [38][30] - Canada reported positive comparable store sales and transaction growth, with food sales up 12.5% [40][30] - China's comparable store sales were flat, but positive transactions and expanding margins were noted [41][30] Market Data and Key Metrics Changes - Eight of the top ten international markets returned to flat or positive comparable sales growth [27][30] - The UK and Middle East reported positive transaction comps, while Japan achieved its sixteenth consecutive quarter of comp growth [28][30] - In the U.S., market share, brand sentiment, and customer contacts regarding wait times are improving [38][30] Company Strategy and Development Direction - The company is focused on the "Back to Starbucks" strategy, emphasizing customer experience and partner engagement [4][5] - Investments are being made across four pillars: partners, coffee houses, customer experience, and marketing/menu [7][8] - The company aims to improve store economics and reduce new store build costs while maintaining a strong customer experience [42][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, noting early indicators of recovery in North America and positive signs in Canada [9][30] - The company is committed to building a resilient business that can succeed in various economic environments [6][30] - Management acknowledged that while current financial results are disappointing, significant progress is being made behind the scenes [31][30] Other Important Information - The company is re-evaluating its store portfolio and new store pipeline to ensure better unit economics [15][30] - A new Green Apron service model is being rolled out to enhance customer connection and improve service speed [18][30] - The company is exploring menu innovations and simplifications to drive customer engagement and sales [22][30] Q&A Session Summary Question: Follow-up on labor investment and CapEx - Management confirmed that the focus is on labor investment rather than equipment to improve customer experience and throughput [51][53] Question: Margin concerns and labor investments - Management acknowledged that labor investments have impacted margins but emphasized the importance of staffing for customer experience [57][59] Question: Portfolio evaluation and unit growth pace - Management indicated a potential slowdown in unit growth while evaluating the portfolio, aiming for better cost structures [64][66] Question: Menu simplification impact on transactions - Management noted that simplifying the menu has led to improved transaction comps across a larger percentage of stores [70][72] Question: Resilience in a challenging macro environment - Management highlighted the importance of creating a strong third place experience to maintain customer traffic during economic downturns [75][76] Question: Mobile order sequencing pilot results - Management reported positive results from the mobile order sequencing pilot, improving service times and partner efficiency [79][81] Question: Return on invested capital (ROIC) focus - Management emphasized the importance of durable growth and good returns on invested capital as key metrics for decision-making [85][87]

Financial Data and Key Metrics Changes - Total company revenue for Q2 FY2025 was $8.8 billion, reflecting a 3% increase in constant currency compared to the prior year, despite a 1% decline in comparable store sales [37][30] - Earnings per share (EPS) was $0.41, down 38% from the prior year, primarily due to expense deleverage and increased store investments [45][30] - Global operating margin contracted by 450 basis points to 8.2%, driven by labor investments and deleverage [43][30] Business Line Data and Key Metrics Changes - North America experienced a 2% decline in comparable store sales, with transaction declines improving to negative 4% [38][30] - Canada reported positive comparable store sales and transaction growth, with food sales up 12.5% [40][30] - China's comparable store sales were flat, but positive transactions and expanding margins were noted [41][30] Market Data and Key Metrics Changes - Eight of the top ten international markets returned to flat or positive comparable sales growth [27][30] - The UK and Middle East reported positive transaction comps, while Japan achieved its sixteenth consecutive quarter of comp growth [28][30] - In the U.S., market share, brand sentiment, and customer contacts regarding wait times are improving [38][30] Company Strategy and Development Direction - The "Back to Starbucks" strategy focuses on customer experience, partner engagement, and operational improvements [4][5] - Investments are being made in labor rather than equipment to enhance service speed and customer connection [19][60] - The company aims to reclaim its coffeehouse heritage and improve store designs to foster community connections [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the turnaround strategy, noting early indicators of recovery in North America and positive signs in Canada [9][30] - The company is committed to building a resilient business that can thrive in various economic environments [6][30] - Future growth is expected to be driven by improved customer experiences and operational efficiencies [31][30] Other Important Information - The company is evaluating its store portfolio and new store pipeline to ensure better unit economics [42][30] - A focus on reducing new store build costs is underway to enhance returns [42][30] - The company is committed to transparency throughout the turnaround process [36][30] Q&A Session Summary Question: Follow-up on labor investment and CapEx - Management confirmed that the focus is on labor investment rather than equipment, which allows for quicker improvements in service speed and throughput [51][53] Question: Margin concerns and labor investments - Management acknowledged that while labor investments have impacted margins, they are essential for improving customer experience and driving transaction growth [57][60] Question: Evaluation of the store portfolio - Management indicated that they are slowing down new builds to reset renovation and build costs, aiming for a more efficient growth strategy [64][66] Question: Menu simplification impact - Management noted that simplifying the menu has led to improved transaction comps, with a significant increase in stores reporting positive sales [68][70] Question: Resilience in a challenging macro environment - Management emphasized the importance of creating a strong third place experience to maintain customer traffic, even in economic downturns [75][76] Question: Mobile order sequencing pilot results - Early results from the mobile order sequencing pilot show improved service times and enhanced partner-customer connections [79][81] Question: Return on Invested Capital (ROIC) focus - Management highlighted the importance of durable growth and good returns on invested capital, indicating a shift in focus towards these metrics [84][86]

Core Points - Starbucks is implementing a new dress code for employees in North America, effective May 12, requiring solid black shirts and khaki, black, or blue denim bottoms to refresh its store image and boost business under CEO Brian Niccol [1][2] - The company is cutting 30% of its menu to create a more familiar and consistent coffeehouse experience, part of Niccol's "Back to Starbucks" strategy aimed at improving profitability and the work environment [3][6] - Niccol has made several operational changes, including eliminating 1,100 support partner roles and closing unfilled positions to streamline operations [5] - Starbucks is reintroducing traditional coffeehouse elements, such as personal messages on cups and condiment bars, while also reversing its open-door policy regarding restroom access [8][9] - The company plans to double its paid parental leave benefits this spring, significantly enhancing support for its workforce [11]