Returning soon to a Starbucks near you: Ceramic mugs, Sharpies on cups and the condiment bar to add your own cream and sugar. Those were just some of the details that Brian Niccol shared Wednesday night on his first earnings call since taking over as CEO of the struggling coffee giant on Sept. 9. Starbucks last week p reannounced an ugly set of fiscal 2024 fourth-quarter results and suspended 2025 guidance, so the main event was what the former Chipotle boss had to say. Niccol’s overarching message: A bunch of changes, both big and small, are coming to Starbucks’ menu, mobile app and stores that should satisfy all parties involved. For now, it’s coffeehouse music to our ears. “This was a remarkable call,” Jim Cramer said Wednesday night. “Brian’s vision is clear: We have to make it easier for our customers to get a cup of coffee. Elegant in its simplicity. So right.” The way Niccol tells it, customers will get their orders faster with more predictability on the price — and have a welcoming place to sit and enjoy it if they so choose. Employees will actually be able to focus on making hand-crafted drinks and connecting with customers as staffing levels are adjusted to better accommodate each store’s needs throughout the day. And investors will see a company that is growing again and worth owning. “As we get the foundation reset, I believe there’s a lot of additional catalysts for growth in the business,” Niccol said. “I don’t have an answer for you yet [on specific financial targets]. “What I can tell you it adds up to is more growth. It adds up to a turnaround, and it adds up to more growth. That’s what we’re going to spend our time on.” Shares of Starbucks were slightly higher in extended trading Wednesday night. Niccol had shared glimpses of his “Back to Starbucks’ turnaround strategy in a public letter posted on his second day on the job and, more recently, in prepared remarks accompanying last week’s preannounced results. Still, Wednesday’s earnings call was a much-anticipated event for analysts and investors alike, representing Wall Street’s first chance to directly ask the highly regarded CEO questions on his plan. It came after Niccol wisely clear the decks last week by releasing preliminary results from the July-to-September quarter, which mostly predated his tenure. Shares initially fell in response, but ultimately finishing the following day higher by nearly 1%, at $97.65 each. Starbucks stock didn’t do much in the five sessions since then, ending Wednesday at $97.32 a share. Of course, that is about 26% above where the stock closed Aug. 12, the day before Niccol’s hiring — and the ouster of his beleaguered predecessor Laxman Narasimhan — was announced. Almost all of those gains occurred Aug. 13, when the stock soared 24.5% in a single day on optimism about Niccol’s surprise appointment. Starbucks is far from a quick fix, but Niccol on Wednesday night demonstrated that the optimism may not be misplaced. If there’s an executive who can help Starbucks reverse same-store sales declines — particularly in the U.S. and China, its two biggest markets — it may very well be the person who deftly led Chipotle out of an inherited food-safety crisis and through the rise of mobile ordering. Shares of Chipotle trounced the S & P 500 during his more-than-six-year tenure, up 773% between March 5, 2018, and Aug. 12. The S & P 500 advanced 96.4% in the same stretch. SBUX .SPX 5Y mountain Starbucks’ five-year stock performance compared with the S & P 500. At Starbucks, Niccol’s initial focus is the U.S. business, and he detailed a number of steps Wednesday to reestablish its “core identity” as a company that serves quality drinks and can be embraced by customers as a community coffeehouse. “We’re reclaiming the third place,” Niccol said, using the term describe a place between work and home that was popularized by Starbucks’ three-time CEO Howard Schultz, who built the company into a global powerhouse. In the coming months, Niccol said the company will reintroduce personal touches to the Starbucks’ experience, such as the condiment bar, ceramic mugs for people staying to drink their beverages, and Sharpie markers for baristas to write customers’ names and messages. Jim said he was particularly excited by the return of the condiment bar as a way to lure back longtime customers who grew disaffected. “I used to love to go to my Starbucks and put a huge amount of cinnamon on my triple venti [cappuccino],” he said. “Then one day it wasn’t there anymore. Then I wasn’t there anymore.” Starbucks also is beginning the process of reviewing and revising its store designs to bring back more comfortable seating, Niccol said, without providing explicit details on a timeline. For now, though, CFO Rachel Ruggeri indicated that Starbucks is reducing new store additions and renovations in 2025, which will help unlock “capital to support our broader turnaround.” Niccol announced two concrete actions that Starbucks on pricing that could combat perceptions that its drinks were too expensive. The first is that it will eliminate an upcharge for non-dairy milks at North American locations owned and operated by Starbucks (some stores are run by licensees). The second is that Starbucks intends to not raise prices at the same subset of stores through its fiscal 2025, which is underway and at the end of September 2025. Analysts asked about the financial impact such decisions could take, particularly for alternative milks. Niccol declined to share specifics, but made the case that it will be worth any near-term dent. “Obviously, we’ve got a pretty good idea of what the alt milk implication is, but I’m confident it’s the right investment in the business to get people to reengage with the brand accordingly,” said Niccol, who also hinted at menu simplification in the future for both food and beverages. That should help Starbucks fix another problem that has frustrated customers who place orders in store and those who do so through its popular mobile app: wait times. Niccol said Starbucks’ pledge is to deliver in-store orders in four minutes or less. In addition to streamlining the menu, Niccol said changes to staffing levels, especially during the busiest parts of the day, should help speed up service. As for mobile orders, which account for more than 30% of transactions, the CEO said Starbucks will tweak its algorithm so that it provides specific pickup times to customers. It also will implement “common sense guardrails” on mobile ordering that will “improve the experience” for everyone, Niccol said. And finally, Niccol said in the coming months it will take steps that better separate mobile orders from those placed in-store — reminiscent of a priority during his time at Chipotle . Investors are hoping Starbucks’ stock returns are reminiscent of that tenure, too. (Jim Cramer’s Charitable Trust is long SBUX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. 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Customers order at a Starbucks in Manhattan Beach, California, on July 19, 2024.
Jakub Porzycki | Nurphoto | Getty Images
Returning soon to a Starbucks near you: Ceramic mugs, Sharpies on cups and the condiment bar to add your own cream and sugar.
Those were just some of the details that Brian Niccol shared Wednesday night on his first earnings call since taking over as CEO of the struggling coffee giant on Sept. 9. Starbucks last week preannounced an ugly set of fiscal 2024 fourth-quarter results and suspended 2025 guidance, so the main event was what the former Chipotle boss had to say.
