A man who can cover up a bitter aftertaste like Brian Niccol belongs at Starbucks SBUX -0.51%decrease; red down pointing triangle.
Barely six weeks into the job, the new chief executive delivered a double shot of bad news Tuesday night when the coffee giant released full-year financial highlights more than a week early. Results in the year’s final quarter fell well short of already-muted expectations with global comparable sales down twice as much as feared, earnings more than a fifth short of analysts’ consensus and guidance for the current fiscal year scrapped. The only sweetener was a modest boost to the quarterly dividend.
If Niccol’s hapless predecessor Laxman Narasimhan were still in charge, the market reaction would have been thermonuclear, probably sending the stock to multiyear lows. Yet, even with the chain worth $22.5 billion or 25% more than the day he was appointed in August, shareholders appear to be giving Niccol the benefit of the doubt. Part of that has to do with his pedigree at Chipotle and at Yum Brands YUM -0.64%decrease; red down pointing triangle before that. But a lot of credit goes to the radical simplicity of his message: “Back to Starbucks.”
It is hard to glean a lot of detail from a slogan and a handful of generic action steps, and Niccol admitted that he still is figuring things out. There are some clues, though. He has suggested moving the emphasis from the hyperefficient, highly digital but impersonal experience of recent years at the chain to one more akin to the slower, welcoming “third place” originally conceived by three-time boss Howard Schultz: “A welcoming coffeehouse where people come together,” according to a recorded statement to shareholders.
That is probably music to some customers’ ears, but shareholders have to weigh the trade-offs. While the company is unlikely to completely scrap its hefty investment in purely drive-through locations, digital rewards or labor-saving devices to make complicated drink orders more quickly, it sounds like a return to a simpler era.
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