Starbucks Turnaround Falls Apart

By Douglas A. McIntyre Published Jul 30, 9:15AM EDT

Quick Read

CEO Brian Niccol says a Starbucks Corp. (NASDAQ: SBUX) turnaround is on track.
Its share price and its most recent earnings say otherwise.

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New CEO Brian Niccol says a Starbucks Corp. (NASDAQ: SBUX | SBUX Price Prediction) turnaround is on track. New quarterly earnings and his failure to get the company’s stock back to the hot investment it used to be say otherwise.

Starbucks stock was a winner as recently as late 2020 and early 2021. The shares have been a waste of money since then, and still are. A real turnaround would mean they would at least match the S&P 500 in the past five years. Rather, they are up 21% since then, while the S&P 500 is up 95%. Much of Starbucks’ less-than-mediocre stock performance is due to a decline since March. Few people believe Niccol has done a good job, despite his rosy forecasts that his turnaround plan is working. The numbers say otherwise. Revenue for the quarter was only up 4% to $9.5 billion.

Comparable store increases are the heartbeat of Starbucks’ business. They fell 2% in the most recently reported quarter. In its home market of North America, they were down 3%. Niccol’s early bet is that he can turn around the U.S. market. The worst news was that per-share earnings fell a stomach-churning 47% to $0.49.

Niccol’s forecast for better days is based on his experience as a turnaround artist. That is a poor idea, as his Starbucks results tell otherwise. Oddly, he insisted on using his past success to explain to investors why Starbucks results would get better. “We’ve fixed a lot and done the hard work on the hard things to build a strong operating foundation, and based on my experience of turnarounds, we are ahead of schedule.” He offered scant evidence that is true.

What is true is that he has cut back the menu to speed service. He has made baristas wear the equivalent of a uniform. He has told some management members they needed to return to the office or be fired. In the meantime, he has a private jet that flies him from southern California to Starbucks headquarters in Seattle. He might be better off if he relocated Starbucks headquarters near to his home.

There is no turnaround at Starbucks, and there is no evidence there will be. The company’s best years are behind it.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.