Starbucks CEO Niccol Boosts Traffic but Squeezes Profit Margins

Brian Niccol’s first two years as Starbucks CEO have produced a qualified turnaround, with the company’s “Back to Starbucks” strategy improving customer traffic after problems with long wait times, ineffective promotions and an overly complex menu. Comparable sales rose 7.9% in the fiscal third quarter ended June 28, marking the fourth consecutive quarter of improvement after six quarters of declines. The recovery has come at a cost, as Starbucks has spent hundreds of millions of dollars on additional staffing, store upgrades and marketing, squeezing profit margins. Niccol’s customer-focused approach draws on his earlier success at Chipotle, but investors now want him to convert the improved customer experience into sustainable profits while managing labor issues, restructuring and strategic challenges such as the company’s China operations. Starbucks shares have gained about 30% since his appointment, though they have lagged the broader S&P 500.