Former Starbucks CEO Howard Schultz weighed in Sunday on the coffee chain’s dismal latest quarterly report, saying he believes the company will recover if it improves its U.S. stores. According to Howard Schultz, Starbucks earnings suggests the leaders should spend more time in stores and focus on coffee drinks as they work to turn around flagging sales.
In a LinkedIn post published over the weekend, Schultz said many people had reached out to him after Starbucks reported weaker-than-expected Q2 sales and earnings last week.
Starbucks low Q2 performance
Howard Schultz, who no longer has a formal role within Starbucks, wrote that the company needs to improve its mobile order and pay experience and overhaul how it creates new drinks to focus on premium items that set it apart.
“The stores require a maniacal focus on the customer experience, through the eyes of a merchant. The answer does not lie in data, but in the stores,” Schultz wrote in a letter on Sunday evening posted to LinkedIn.
In a statement, Starbucks said it always appreciates Schultz’s perspective.
“The challenges and opportunities he highlights are the ones we are focused on. And like Howard, we are confident in Starbucks long-term success,” Starbucks said.
Starbucks financial results
On Tuesday, Starbucks slashed its full-year forecast after a surprise decline in same-store sales led the company to miss Wall Street’s estimates for quarterly earnings and revenue.
The Seattle coffee giant said revenue dropped 2% in the January-March period as store traffic slowed around the world. It was the first time since 2020 that the company saw a drop in quarterly revenue. Starbucks also lowered its sales and earnings guidance for its full fiscal year.
Analysts, caught off guard by the chain’s underperformance. Starbucks’ U.S. traffic fell 7% in the quarter. The chain could still be dealing with the repercussions of social media backlash related to its position on conflict in the Middle East, Bank of America Securities analyst Sara Senatore wrote in a research note Monday.
Howard Schultz’s contribution to Starbucks
Schultz, who turned Starbucks from a small chain into a coffee giant, stepped down from his latest stint as chief executive a little over a year ago. He handed the reins over to Laxman Narasimhan, who previously was CEO of Lysol owner Reckitt. Schultz also stepped down from the Starbucks board last year.
Starbucks strategy
Howard Schultz is not impressed with the current offerings, like Starbucks new lineup of spicy drinks and said its strategy needs to be “elevated with coffee-forward innovation that inspires partners, and creates differentiation in the marketplace, reinforcing the company’s premium position.”
He appeared to offer advice to his successor as he tries to turn Starbucks sales around.
“Leaders must model both humility and confidence as they work to restore trust and increase performance across the organization,” Schultz wrote.
Drop in sales
Same-store sales in the United States fell 3%, a sharp reversal from the same quarter a year ago, when they grew 12%. In China, the chain’s second-largest market, sales fell a staggering 11%.
Narasimhan vowed to turn the business around by including an update to its app and mobile and payment offerings, improving service times and rolling out revamped menu items to lure customers back.
Starbucks stock report
Since the report, Starbucks stocks have fallen 17%, dragging its market value down to $82.8 billion.
