Starbucks (SBUX) is embarking on a new era with Brian Niccol as its new CEO, who officially took the helm this week. He has outlined a strategy to revive Starbucks, focusing on a U.S. turnaround before expanding its international initiatives.
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In an open letter to employees and shareholders, the CEO acknowledged that the company has drifted away from its roots. Further, he highlighted the key problems in U.S. stores such as overwhelming menus, inconsistent product quality, excessive wait times, and chaotic morning handoffs.
Here’s How Niccol Aims to Solve Starbucks’ Issues
Niccol has identified four key areas for improvement to address Starbucks’ struggles in the U.S. He plans to equip outlets with the necessary tools to ensure efficient drink production. Also, he aims to streamline operations to handle peak morning rush periods.
Simultaneously, Niccol seeks to make SBUX’s stores more inviting with comfortable seating and clear distinctions between “to-go” and “for-here” service. Moreover, the new CEO plans to work on Starbucks’ branding to reclaim its identity as a “community coffee house.”
To support these changes, he will invest in technology, the supply chain, and the Starbucks app and mobile-ordering platform.
Niccol Targets International Growth
While the U.S. market remains the primary focus, Niccol recognized the need to address challenges in key markets like China, where same-store sales declined 14% in the third quarter. He plans to assess China’s growth potential and leverage Starbucks’ strengths in the market.
Additionally, the CEO plans to address misconceptions about the Starbucks brand in the Middle East, where boycotts have impacted the company’s sales.
Is Starbucks a Buy, Sell, or Hold?
Turning to Wall Street, SBUX has a Moderate Buy consensus rating based on nine Buys and 18 Holds assigned in the last three months. At $86.26, the average Starbucks price target implies 7.59% downside potential. Shares of the company have gained about 17% in the last three months.
