By Karen Leigh | Bloomberg
Former Starbucks Corp. Chief Executive Officer Howard Schultz urged the coffee chain to own its shortcomings and fix operations following its biggest sales miss in years.
“At any company that misses badly, there must be contrition and renewed focus and discipline on the core,” he wrote in a post on LinkedIn on Sunday. “Own the shortcoming without the slightest semblance of an excuse.”
Starbucks’ shares plummeted after sales dropped for the first time since 2020. The Seattle-based coffee chain, which has struggled to lure budget-conscious consumers as inflation persists, said chilly January temperatures slowed store visits and the conflict in the Middle East hurt quarterly results.
Shares were little changed on Monday. The stock is down 32% in the last year, compared to a 25% rise in the S&P 500.
Schultz, who stepped down from his third stint as CEO in 2023, remains Starbucks’ fifth-largest shareholder, and single largest individual shareholder.
He pressed management and board members on spending more time with customer-facing employees, without naming current CEO Laxman Narasimhan. He also said the company needs to reinvent the mobile ordering and payment platform.
The chain has been looking to turn around its performance through initiatives like cutting wait times, fulfilling morning demand and getting more customers to try its app. A boba tea-like drink will be launched this summer.
Read more: Starbucks CEO Says Faster Service, Boba Drinks Can Fix Chain
“The go-to-market strategy needs to be overhauled and elevated with coffee-forward innovation that inspires partners, and creates differentiation in the marketplace, reinforcing the company’s premium position,” he wrote. “Through it all, focus on being experiential, not transactional.”
Starbucks has faced additional pressure in China, the second-most populous country in the world. Local rival Luckin Coffee Inc. became the country’s dominant coffee chain last year — the first time it’s surpassed Starbucks in annual sales there. While Starbucks reported a 4% decline in same-store sales in the latest quarter, they tumbled 11% in China.
Schultz said he was “confident” the company’s China business would return to health and become its biggest market. “The brand is incredibly resilient, but it’s clearly not business as usual.”
