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Starbucks (NASDAQ: SBUX) shifts to more conservative policy on freeloaders

by
Dan Weil
Quantfury Team
starbucks

Starbucks (NASDAQ: SBUX), the beleaguered world’s biggest coffeehouse chain, has just taken a step that plays against type – against its liberal political image, that is.

Under its new CEO Brian Niccol, the company is taking a bit of a turn to the right, as it tries to right the ship. Other companies too have adopted more conservative stances in recent months, with many dropping diversity programs, for example.

As for Niccol and Starbucks, it is now ditching its seven-year policy at US stores that allows anyone to hang out in the store or use the bathroom, even if they don’t buy anything. 

The problem with the old rules, particularly in big cities, was that unkempt, often homeless, people were filling Starbucks stores. They often emitted unpleasant odors and left the bathrooms a mess. That drove some of Starbucks loyal customers and potential customers away.

“We know from customers that access to comfortable seating and a clean, safe environment is critical to the Starbucks experience they love,” Sara Trilling, president of Starbucks North America, wrote in a letter to store managers.

“We’ve also heard from you, our partners, that there is a need to reset expectations for how our spaces should be used, and who uses them.”

Starbucks’ myriad woes

Starbucks has suffered from a litany of woes in recent years, many of them self-wrought. Staff size has been inadequate, vexing customers and workers alike. Online ordering has run amok, with wait times frequently exceeding the estimates given to customers.

A myriad of menu choices also has made life more difficult for workers and customers. Rising prices haven’t helped, nor have costly promotions and discounts.

So it’s no wonder that sales dipped 3.2% in fiscal 2024, ended Sept. 30, from a year earlier, and profit dropped 25%. The stock price has slumped 7% over the past three years combined, far behind the 25% gain of the S&P 500 index. 

Niccol’s now the man 

But now Starbucks is trying to change things under Niccol, who took over as CEO in September after a successful tenure at Chipotle Mexican Grill. The changes involve everything from simplifying online ordering, to reducing the chain’s overly complex menu, to better scheduling workers’ hours.

And, of course, there’s the company’s turn toward the political right, as demonstrated by the new rule keeping out freeloaders. To be sure, not all of Niccol’s policies are conservative. He also has promised to cooperate more with Starbucks unionized workers than the company did previously.

So far investors seem mildly receptive to Niccol’s overall plan. The stock is up 2% since he took office.