24/7 Wall St. Insights

• Starbucks Corp. (NASDAQ: SBUX) locations that don’t open on time reveal a deep problem with the company’s culture.
• Companies that provide poor service lose their customers.
• Also: 2 Dividend Legends to Hold Forever.

New Starbucks Corp. (NASDAQ: SBUX) CEO Brian Niccol has a huge problem. It has affected several stores in New York City and is likely to be a problem elsewhere. That is, Starbucks workers don’t come to work to open stores on time, and customers are, without question, unhappy.

Most recently, 24/7 Wall St. visited a New York City location that is supposed to open at 5 a.m. At 6:15, the store had not opened. Only two employees had shown up. The store usually has six or seven workers. To arrive at the store before 5 a.m., the workers probably must leave their homes well before 4 a.m. The problem has been observed in other stores in the metro area.

With 15,783 locations in the United States, Starbucks management cannot monitor when each store opens. For a struggling company, this problem adds to already deep problems. In the most recent quarter, North American comparable store sales dropped 2% from the same quarter the year before, and global revenue declined 1% to $9.1 billion.

In a recent letter to employees, Niccol pointed out one of the most vexing problems for Starbucks: “there’s a shared sense that we have drifted from our core. We have an opportunity to make the store experience better for our partners and, in turn, for our customers.” Hopefully, that core includes having employees who show up to open locations on time.

Although there is no hard and fast rule, companies that disappoint their customers with poor service find that many of those customers don’t come back. An unopened store at 6 a.m., which should have been open at 5 a.m., indicates a severe problem.

Another sign of Starbucks’s lack of interest in its image is that neither the company’s investor relations nor press departments answered 24/7 Wall St.’s requests for comments about the store problem.

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