NEW YORK: Starbucks Corp is looking to cut how much it spends upgrading stores, which could help address investor anxiety over the price tag of turning the chain around.
Starbucks had been spending US$800,000 to US$1mil for each store remodel, chief executive officer Brian Niccol told staff in a companywide meeting, according to a recording viewed by Bloomberg News.
The coffee chain is looking at ways to bring down costs for these renovations, which might involve major changes such as electrical or plumbing upgrades.
Separately, the company came up with a new strategy to refresh stores for about US$150,000 each or less, Niccol said.
Such a “coffeehouse uplift” might include less drastic changes for stores already in good shape, such as new furniture and fresh paint.
“We started building really expensive stores that didn’t look very great, so it couldn’t have been any worse,” Niccol said.
“The seats are crap, and it’s really expensive. It’s impossible to make sense of that financially,” he added.
Starbucks confirmed that cost-cutting related to the renovations doesn’t change ongoing plans to add more outlets, comfier chairs, or other details designed to make stores more inviting – a key part of Niccol’s turnaround plan.
He’s also leading projects to speed up service with more staff and technology, including an algorithm to prioritise which orders to prepare first, a move he has said is already cutting wait times in test locations.
The company posted its fifth consecutive quarterly decline in comparable sales on April 29.
Earnings per share took a hit because of expenses associated with the turnaround, and the company signalled profitability will remain under pressure as the coffee chain invests in stores and operations.
Those warnings contributed to investor jitters, with shares falling 5.7% Wednesday. — Bloomberg
