Starbucks reported stronger-than-expected sales for its fiscal first quarter, with some of its recent efforts showing positive results. The Seattle-based coffee giant posted revenue of $9.4 billion for the 13-week period ending December 29, matching analysts’ expectations, which had forecast $9.3 billion.
Brian Niccol, the company’s chairman and CEO who took over in September, attributed the growth to customer-focused changes. These included eliminating the extra charge for non-dairy milk and simplifying the menu, both of which helped improve service and boost foot traffic at stores.
During a call with investors, Niccol revealed that Starbucks plans to reduce its food and beverage offerings by 30% this year in order to streamline operations and improve service speed. Additionally, the company will introduce digital menus across all company-owned U.S. stores over the next 18 months to clarify ordering options and make it easier to adjust offerings based on the time of day.
Niccol also mentioned that Starbucks is increasing staffing at certain stores and testing new ordering algorithms designed to prioritize in-store customers while better managing the flow of mobile orders.
Niccol explained that the company’s main challenge is the lack of control over mobile orders, which often flood in faster than customers can pick them up. As a result, drinks pile up on the counter, affecting the experience for customers who are physically present in the store.
To reestablish itself as a gathering space, Starbucks announced this week that it will start offering ceramic mugs and provide free refills of coffee or tea for in-store customers. Additionally, the company is implementing a new policy that requires customers to make a purchase if they wish to stay and use the restroom.
Niccol emphasized that Starbucks is returning to the core elements that make it a unique experience.
The company’s same-store sales, which measure performance at locations open for at least a year, dropped 4% compared to the same period last year. This was a smaller decline than the 5.5% analysts had forecast, according to FactSet, and an improvement from the previous quarter, when global same-store sales fell by 7%.
In the U.S., same-store sales also declined by 4% in the first quarter. While transactions were down by 8%, customers spent more per visit, and Starbucks reduced discounts during this period, Niccol explained.
Niccol recently visited China, Starbucks’ second-largest market, where the brand has faced competition from lower-cost alternatives. In China, same-store sales fell 6% in the fiscal first quarter. He mentioned that Starbucks is exploring a strategic partnership in China to help drive future growth.
As part of his restructuring efforts, Niccol also announced changes to Starbucks’ corporate leadership. Mike Grams, former president of Taco Bell, will take on the role of Chief Stores Officer for North America. Meredith Sandland, who was CEO of Empower Delivery and previously Chief Development Officer at Taco Bell, will become Starbucks’ Chief Store Development Officer. Niccol, who led Taco Bell until 2018, left to run Chipotle before joining Starbucks.
Earlier this month, Niccol also revealed that Starbucks plans to implement an unspecified number of corporate layoffs by early March.
After the announcement, Starbucks’ shares rose by less than 1% in after-hours trading on Tuesday.