Starbucks (NASDAQ: SBUX) is doing less to get more

Starbucks (NASDAQ: SBUX) is five months into a back-to-basics turnaround plan that its new CEO, Brian Niccol, laid out during his first week on the job back in September. The effort has yet to boost the bottom line, but customers and investors seem to like what they’ve been seeing so far with shares in the world’s most famous coffee brewer starting out the new year by rising 23%.

Mr. Niccol is well known for reinvigorating fast food favorites Chipotle Mexican Grill (NYSE:  CMG) and Taco Bell (NYSE: YUM), and his vision for Starbucks is remarkably simple: make it feel like a friendly coffee shop once again. Gone are the days of freeloading loiterers using the facilities without making a purchase, and customers can finally resume adding their own cream and sugar from condiment bars that mostly vanished during the pandemic.

Also back are the emblematic notes and smiley faces handwritten by friendly baristas with Sharpie markers on paper cups, and Starbucks is restoring comfortable seating to stores where it had been gutted. You can also again sip your latte from a ceramic mug. It’s almost sounding like an episode of Friends. 

“This is just a practical, common sense approach,” Mr. Niccol said in a recent interview with the Wall Street Journal. “We’re in the business first and foremost to serve our customers.” It’s a marked departure from the gimmicks and consulting speak that dominated the short tenure of his unsuccessful predecessor. 

Simplified menu

That’s not to say there aren’t bigger behind-the-scenes tweaks underway. Mr. Niccol is moving to simplify menu options, but the real gains he’s eyeing are set to come from efforts to reduce in-store wait times and better manage the flow of mobile orders. He said the company had messed up by focusing too much on mobile orders at the expense of in-store customers who faced long waiting times.

“Right now, when you mobile order, you’ll get, sometimes, a message that says ‘the beverage will be ready in three minutes.’ You physically can’t get there in three minutes,” Mr. Niccol said, adding that the company is now testing a new algorithm to keep in-store waits to four minutes or less. “We’re mismatching when the customer wants it, and when we should be making it. The number one request is ‘let me pick what time I can come pick up my beverage.’’

Mr. Niccol, recounting consecutive quarters of same-store declines that have pushed shares down 11% from their all-time high, said the company’s efforts to expand its reach by focusing on its mobile app had turned into a problem instead of an advantage. “I also want to see mobile order not be a problem,” he said. “More access to Starbucks should be a good thing.”

More access

And more access is exactly what Starbucks is planning to deliver. While the company is conducting a round of corporate layoffs announced on Monday that will eliminate 1,100 roles, Mr. Niccol said on an earnings call last month that he still saw room to double its store count in the US. That’s growth potential that investors should be excited about, and perhaps explains why they seem to be shrugging away comparable store sales that declined 4% last quarter and falling margins.

“Despite near-term challenges, we have significant strengths and a clear plan,” he told investors. “We’re on the track to turn the business around. We are where we want to be one quarter in, but much of our work is just beginning.” As Mr. Niccol sees it, rock bottom is firmly in the rearview. He told the WSJ, meanwhile, that he hoped to have the technological problems solved within a year’s time.

Mr. Niccol has been firm and clear in his messaging, but he’s also been smart to manage expectations with a goal that should be easy to beat. Software can practically write itself now with the aid of AI, and it shouldn’t take an entire year to perfect that algorithm that can better prioritize orders and reduce bottlenecks. Making Starbucks feel like Starbucks again should not be much of a lift.