By Juveria Tabassum and Waylon Cunningham
(Reuters) -Starbucks reported a smaller-than-expected fall in first-quarter comparable sales on Tuesday, in early signs that the struggling coffee chain was benefiting from CEO Brian Niccol’s efforts to revive demand.
The company’s shares rose nearly 4% in extended trading. They have gained nearly 30% since his appointment in August last year.
Niccol, credited with reviving the burrito chain Chipotle Mexican Grill, has looked to return Starbucks to its coffee house roots in the U.S. by rolling out a simpler menu, ceramic cups, refills and condiment bars, and reducing wait times at the cafes to under four minutes.
He has also cut back on the company’s deals and discounts and has instead sought to broaden its marketing beyond its loyalty program members.
Starbucks’ global same-store sales fell 4% in the three months ended Dec. 29, Niccol’s first full quarter at the helm, compared with analysts’ expectations of a 4.6% fall, according to data compiled by LSEG.
“Investors are looking for early indicators that the transformation is in place. The results were broadly in line with expectations,” said Danilo Gargiulo, senior analyst at Bernstein.
The company has also shuffled its top brass. Earlier on Tuesday, Starbucks said its North America president Sara Trilling and chief supply chain officer Arthur Valdez would leave.
Trilling’s role will be split, with former Taco Bell executives Mike Grams and Meredith Sandland becoming North America chief stores officer and chief store development officer, respectively. Niccol was a former top boss at Taco Bell before joining Chipotle.
“Brian is being surrounded by people he trusts. The appointments are paramount to ensure execution of in-store revisions,” Gargiulo said.
Starbucks, which suspended its forecasts for 2025 late last year to give Niccol freedom to pursue his restructuring, has ceded ground to rivals such as Luckin Coffee in China, where comparable sales fell for the fourth straight quarter.
Meanwhile, tensions have increased with the union seeking to organize the chain’s U.S. baristas, as contract negotiations drag on longer than expected since beginning last February.
In December, one of Starbucks’ busiest times, around 300 stores went on strike across the U.S. to demand a contract, according to Workers United, the union representing Starbucks workers.
The union said it has filed more than 90 unfair labor practices in recent weeks and alleges the company has backtracked on the “path forward” it jointly announced with the union last year.
Excluding items, Starbucks reported earnings per share of 69 cents, beating estimates of 67 cents.
(Reporting by Juveria Tabassum in Bengaluru and Waylon Cunningham; Editing by Sriraj Kalluvila)
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