Starbucks reveals what an enormous mess its new CEO has to clean up

By Jordan Valinsky, CNN

New York (CNN) — Starbucks’ new CEO Brian Niccol has a Herculean task in front of him to change the dire state of affairs that the world’s largest coffee chain is currently brewing in.

Surprising Wall Street, the company unexpectedly released its preliminary earnings report Tuesday evening, revealing sales fell – sharply – for the third consecutive quarter. Global sales slumped 7%, fueled by a decline of 6% in the United States and even more in China, where comparable sales crumbled 14% for the quarter ending on September 29.

As a result, Starbucks (SBUX) took the extraordinary step of suspending its financial guidance for the rest of the year. Shares fell nearly 5% in premarket trading Wednesday.

Niccol was blunt in his assessment, writing that Starbucks’ financial performance “makes it clear that we need to fundamentally change our strategy so we can get back to growth.”

Some of the problems that he discovered after about a month on the job include fixing its “overly complex menu,” staffing levels at its cafes and pricing of its drinks and food so “every customer feels Starbucks is worth it every single time they visit,” he said.

“People love Starbucks, but I’ve heard from some customers that we’ve drifted from our core, that we’ve made it harder to be a customer than it should be, and that we’ve stopped communicating with them,” Niccol said in a prerecorded video. “As a result, some are visiting less often, and I think today’s results tell that same story.”

Perhaps one of the biggest changes he’s already made was its marketing. The chain recently rolled out ASMR-like commercials that highlight the sounds and visuals of its handcrafted coffee drinks. Under Niccol, Starbucks is also shifting away from targeting its rewards program members to advertising to attract all customers.

“Starbucks has always been a place where people come together,” Niccol said. “We are revisiting our stores to make sure we’re offering the amenities you’d expect in a community coffeehouse.”

Tuesday’s statement marks the second time investors have heard from Niccol, a celebrated CEO that helped turn Chipotle around from its E coli outbreaks that started in 2015. Last month, he said in an open letter that he wants to return Starbucks to its roots as a “community coffeehouse” that made it the behemoth that it is.

Starbucks’ full earnings will be released on October 30.

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