Reinvention trail: A Starbucks coffee shop in San Francisco. The company is overhauling the Starbucks experience along five broad points, but there’s still uncertainty about what they mean in practical terms over a longer horizon. — Bloomberg
CHICAGO: Howard Schultz took the helm of Starbucks Corp more than five months ago pledging a massive reinvention of one of the world’s largest restaurant companies.
Until now, the details have been vague – but that’s expected to change at the presentation to investors soon.
Starbucks is expected to explain plans to redesign cafes – with analysts saying the company will likely home in on delivery and carryout-friendly formats.
The company is also under pressure to deliver more financial details on what those makeovers will cost in the long term, and what impact kitchen upgrades and higher salaries will have on the bottom line.
“It’s a pretty long list of things that need to be sorted out,” said Ben Wong, an analyst at Motley Fool Asset Management, which owns about 136,000 shares.
“How much are the continued investments in the employees and stores, and how much is that going to impact margins?”
Since becoming interim chief executive officer (CEO) in April, Schultz has said the company is overhauling the Starbucks experience along five broad points, but there’s still uncertainty about what they mean in practical terms over a longer horizon.
The company, which has said it’s spending about US$1bil (RM4.5bil) in fiscal 2022 on higher wages and improved stores, suspended its financial guidance for the year amid uncertainty in the key growth market of China.
Starbucks removed one key question mark earlier this month when it announced Laxman Narasimhan will succeed Schultz as CEO.
The 55-year-old, who’s coming from UK consumer-goods maker Reckitt Benckiser Group Plc, will join the Seattle-based company in October and embark on an extended tour of its operations before becoming CEO in April.
The period will be crucial for realising Schultz’s vision for the company.
Starbucks in the past has closed and relocated less-profitable locations, and is now closing some stores due to security problems while adding more drive-thrus and delivery-focused stores. Remodelled cafes also are supposed to make baristas’ jobs easier and less stressful.
Key hurdles include a unionisation drive which has grown to more than 200 US locations, and uneven performance in China amid ongoing pandemic restrictions. Wong flagged both China and the labour push as adding layers of uncertainty for investors.
Starbucks’s move to raise US barista wages to an average of US$17 (RM76.53) an hour and give additional bumps to more tenured staff hasn’t stopped the union drive that’s become increasingly contentious.
The company is trying to convince employees that they’ll be better off if they don’t unionise. The pay increases have weighed on Starbucks profitability. — Bloomberg
