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(Bloomberg) -- Starbucks Corp. reported better-than-expected quarterly results, luring back lapsed customers with coffee-focused ads and by removing extra charges for nondairy milk.
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Same-store sales fell 4% in the three months ended Dec. 29, the company said Tuesday, an improvement from the 7% slump Starbucks reported in the prior quarter. Chief Executive Officer Brian Niccol, who joined in September, is working to stem a customer exodus sparked by boycotts, price increases and slow service.
Starbucks shares rose as much as 6.8% in Wednesday trading in New York.
Visits from guests who don’t belong to the Starbucks loyalty program increased in response to marketing emphasizing “the craft of our coffee” and “the premium experience you get from Starbucks,” Niccol told analysts. He added that dropping the upcharge for nondairy milk also helped bring back rewards customers who had stopped frequenting the chain.
“Baby steps,” Niccol said, “but all moving in the right direction.”
Earnings per share were slightly higher than the average estimate, while transactions in North America, the chain’s largest market, declined in line with expectations. Operating margin in the region fell because of higher spending on wages, benefits and hours, and due to the removal of the nondairy milk upcharge.
Sales fell by less than analysts anticipated in China, a key market where growth has suffered.
“We knew that it was going to take some time for them to turn around the business, but things seem to be moving in the right direction,” Matthew Goodman, a research analyst at M Science said in an interview. “The changes look to be starting to move the needle.”
In a note to clients, Stifel analyst Chris O’Cull said same-store sales could “return to positive territory” as early as the current quarter. Comparisons are getting less onerous, since in the same period a year ago Starbucks posted its first sales decline since late 2020.
Niccol is focusing on improving the store-experience, starting with the US and Canada. This week, the company brought back ceramic mugs and the condiment bar, while limiting cafe access to customers and their guests.
Starbucks also aims to simplify the menu and to speed up service, and on Tuesday Niccol said the chain would cut about 30% of its food and beverage lineup. He laid out a goal of delivering drinks to in-store customers in four minutes or less while streamlining mobile ordering. There’s a feature in development for the Starbucks app that would let customers select a pick-up time slot, Niccol said.