Will New CEO’s Plan Give Starbucks a Pick-Me-Up?
New Starbucks CEO Laxman Narasimhan is putting his own spin on Starbucks’ business improvement plan, naming several pain points he hopes to address to reinvigorate the coffee chain.
During his first earnings call in his new role, Mr. Narasimhan highlighted areas where he believes Starbucks needed improvement, CNN Business reported. He said that the food “could use more work,” that innovation could be “more purposeful and targeted” and that there was a problem with out-of-stocks and a need for behind-the-scenes streamlining.
“We need to think of our business as having theaters to the front, with a factory in the back,” Mr. Narasimhan said on the call.
Mr. Narasimhan’s tenure appears to be off to a good start as far as The Street is concerned. Starbucks’ same-store sales in the U.S. were up 12 percent and store traffic jumped six percent in the second quarter, CNBC reported earlier this week. The chain’s loyalty program memberships in the U.S. increased 15 percent to 30.8 million.
Mr. Narasimhan did not address the ongoing unionization effort at Starbucks. The union push and Starbucks’ opposition to it have represented one of the most visible points of conflict for the new labor movement amid a renewed interest in organized labor throughout the U.S. workforce.
Pricing at the chain also continues to be a thorny issue as consumers remain price-conscious in the face of ongoing inflation.
Sean Dunlop, equity analyst at Morningstar, discussing Starbucks’ earnings call with Yahoo! Finance, said it is unlikely that Starbucks will continue to raise incremental prices after a recent round of hikes on the menu. Mr. Dunlop pointed out that the core Starbucks customer tends to trade out of category by not visiting the chain as frequently rather than trading down to cheaper items when price hikes reach an unacceptable level.
Starbucks increased its prices by six percent in 2022, according to an Associated Press report.