(This April 29 story has been corrected so that the Siren System Store remodeling program was initiated by Howard Schultz instead of Laxman Narasimhan, para. 4)
By Judveria Tabassum
(Reuters) - Starbucks faces challenges in resuming its business as the coffee giant announced disappointing global comparable sales and profits, inflation and economic uncertainty fueled costs and weakened U.S. demand, CEO Brian Niccol said on Tuesday.
Investors have dropped Niccol for four consecutive quarters by reducing production and service hours and investing in stores to improve customer experience.
"Our financial results have not yet reflected our progress, but we have real motivation for the "Back to Starbucks" plan," Nicole said in a statement.
Niccol said Starbucks paused to launch an alert system store remodeling program launched by former CEO Howard Schultz under Howard Schultz because it was heavy.
Nicole said in a call after the tribute that the company will focus on improving front-end delivery rather than kitchen equipment. “The device doesn’t understand the customer experience we need to provide.”
Nicole said Starbucks is increasing service speeds with the right staffing and deployment, and its refreshing marketing resonates with customers.
He said Starbucks will also review its U.S. store portfolio as it launches workforce-focused technology changes, including a pilot program that allows customers to arrange their mobile orders.
But consumers are increasingly cautious as unstable trade tariffs from U.S. President Donald Trump create economic uncertainty and threaten to cheer on inflation. U.S. restaurant visits and spending weakened in February and March.
Starbucks shares fell 6.5% in expanded trading. The stock surged in the months since Niccol's appointment as CEO, down about 7% so far this year.
Fiscal declined 1% in the second quarter ended March 30, worse than the 0.24% decline estimated by analysts in the LSEG poll. The company said Canadian sales resumed growth in the quarter.
Turnover timetable
Bernstein analyst Danilo Gargiulo said that traffic may take time because the store changes and the changes in its coffee house roots may take at least three to six months.
Starbucks is cutting promotions and discounts and has invested in its loyalty programs in broader marketing.
In the second quarter, the average ticket or amount spent by customers increased by 3%.
The company said it will conduct localization and mobile production as needed to mitigate the impact of U.S. tariffs on imports from China.
The company's international business improved slightly, with sales in China unchanged after four consecutive quarters of decline. Starbucks said it is committed to developing its business in China in the long term.
International comparable sales increased by 2%, while estimates fell by 1.13%.
Gross margin fell by 590 basis points in the quarter, and the company reported adjusted earnings per share of 41 cents and estimated at 49 cents.
Same-store sales fell 1% in the second quarter compared to analysts' average estimate of 0.26%. Comparable sales fell 4% in the first three months.
(Report by Juveria Tabassum in Bangalore; other reports by Waylon Cunningham; Edited by Sriraj Kalluvila and Richard Chang)