While Starbucks reported a 4% decline in global same-store sales for the first quarter 2025 (the fourth earnings period in a row of negative comps), driven by a 6% decrease in transactions, this negative pattern does not tell the whole story for the Seattle-based coffee chain.
Ahead of Starbucks’ earnings call on Tuesday for the first quarter ended Dec. 29, CEO Brian Niccol released a video reminding investors, employees, and customers that the company is “only one quarter into our turnaround.”
Starbucks’ stock price — which declined after results were released but climbed back up after Niccol’s remarks — reflects the mixed reality of Starbucks’ new chapter.
Niccol not only reiterated the changes that have already been made under the “Back to Starbucks” strategy — including handwritten names on cups, ceramic mugs for in-café guests, and several executive team updates — but he also announced new changes coming soon. These include:
- Reducing food and beverage SKUs by 30% by the end of the year
- Piloting a prioritization algorithm to help baristas operate more efficiently behind the line
- Rolling out order scheduling to the Starbucks app
- Improving pricing transparency on the mobile app so customers can see the price of their order as they build it
- Testing out risers and shelves to help separate the in-store and mobile experience for pickup orders
- Diversifying café seating
- Deploying digital menu boards systemwide
Besides the menu reduction (which Niccol had previously mentioned), most of these changes are smaller, operational-focused shifts designed to tip the scales in favor of efficiency and hospitality, instead of chaos and rushed orders, particularly during peak hours.
“Through this work, what we've discovered is most of the challenge comes through the mobile ordering system not having a sequencing system,” Niccol said during Tuesday’s earnings call. “What happens is, that counter area gets really crowded, and for our partners, the work switches to the task of just trying to get drinks and food solved for the rush, as opposed to being able to consistently deliver the moment of connection while they still deliver the coffee drinks.”
The algorithm is designed to improve the output of highly stressed and low-efficiency stores, which Starbucks has identified after putting stores into “quartiles” based on the number of transactions.
“The algorithm takes the stress out of the system -- of having the partner have to figure out how to resolve these mobile orders that just came in that weren't sequenced,”. Niccol added. “Now, it sequences those mobile orders so that it can allow the cafe orders to get fulfilled in a timely fashion and with a touch of humanity.”
He added that the company will be expanding the pilot of the prioritization algorithm after a test run.
The menu simplification is also meant to help with optimization behind the line, though Niccol did not go into detail on which menu items will be on the chopping block. Despite a smaller menu, this does not mean that Starbucks will be taking a backseat on menu rollouts.
“We’ll work to lead this market with breakthrough beverage and food innovation,” Niccol said. “We'll do this by being responsive to customer trends and their changing preferences. We'll rely on our highly engaged green apron partners for inspiration, like we did with our lavender beverage lineup last spring, and will be more responsive and tuned in to cultural moments like we did with the Dubai matcha [a viral concoction made with a popular Dubai chocolate bar].”
In addition to these changes, Starbucks is working on its development strategy across the North America market, with the potential to “double the store count in the U.S. alone” through a mixture of store renovations, new builds across multiple format sizes, and closures of underperforming stores.
Starbucks reported flat net revenues of $9.4 billion for the first quarter of 2025. The company reported a nearly 24% decline in net income from $1.02 billion, or 90 cents per share, for the first quarter 2024, to $781 million, or 69 cents per share, for the first quarter 2025.
The company opened 377 net new stores during the quarter, ending the period with 40,576 stores globally.
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