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Starbucks is fully engaged in a major transformation under CEO Brian Niccol as the year 2026 approaches.
"We must become a learning organization. We must also become an experimental one," Niccol stated during an appearance on Yahoo Finance's Opening Bid Unfiltered podcast at Dreamforce in San Francisco (listen below, see video above).
This involves staying updated on advancements in artificial intelligence and incorporating them into Starbucks' operations. One example to date is Green Dot Assist, a virtual assistant tool that enables staff to address issues instantly.
"So if you encounter a problem with a piece of equipment or aren't sure how to prepare a specific drink, it's an efficient way for us to provide assistance through AI, helping them find the correct answer or solution more quickly," Niccol explained.
The organization is also seeking menu creativity and fresh methods to increase morning customer flow, such as introducing "protein-focused" breakfast options and handcrafted pastries. It is allocating resources to more protein-based beverages, along with enhancing its mobile application.
"I believe there's a genuine chance within the app for voice-based ordering. I also feel there's a real potential to be more, almost like, predicting what we know you're going to order," he said.
In late September, Starbucks announced intentions to shut down underperforming stores and reduce corporate staff as part of an effort to boost profitability and redirect resources toward employee hours at stores and new product development.
The company intends to cut its number of stores by approximately 1% in Canada and the United States during this fiscal year. By the end of the year, the total number of company-owned and licensed stores in the US and Canada is expected to be close to 18,300 — a decrease from around 18,842 at the conclusion of the third fiscal quarter.
Starbucks is also removing 900 non-retail positions and will not fill available roles. The overall restructuring initiatives are expected to cost approximately $1 billion.
These initiatives come in addition to Niccol reviving condiment bars, retraining staff, reinvesting in menu creativity, updating the brand's TV presence, and seeking a partner for its operations in China. Starbucks has also pledged to renovate 1,000 locations to reintroduce seating areas and greenery, as it believes customers are looking for a place to relax once more.
"I believe it's more of an emotion, feeling like you're a part of the community, where if you stay there and watch your community members come and go, you have the chance to greet your neighbor, friend, or family member," Niccol said.
Indications of Starbucks' recovery have been difficult to identify so far, as customers reduce their dining out due to increasing costs for food and essential expenses such as rent and healthcare.
US same-store sales for the fiscal third quarter decreased by 2% due to a 4% decline in customer traffic. Earnings per share dropped 46% compared to the previous year. Operating profit margins fell by 660 basis points from the prior year.
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Investors are holding onto the positive points Niccol highlighted during the late July earnings call. These include low-double-digit same-store sales growth at college locations, better transaction trends in the U.S. towards the end of the quarter, and a "wave" of new beverage and food innovations expected over the next 12 months. The company will also allocate $500 million over the next year for additional labor investments — less than the $1 billion that had been speculated by analysts.
The firm subtly hinted at the possibility of achieving peak operational profits once more.
Starbucks stock has declined by 10% so far this year, while the S&P 500 has risen by 14%.
It will release its fourth fiscal quarter results later this month.
"What was supposed to be a 'own into the event' style of release, with weak comparable sales/US store closures affecting the brand and a major new sales platform recently introduced (protein), has become more complicated in terms of the fiscal fourth quarter earnings outlook due to: (1) concerns that the closures might have confused the protein launch, and (2) increasing indications that overall industry demand has declined," said Citi analyst Jon Tower in a note.
This vulnerability, combined with an unresolved decision regarding China, could lead management to delay providing fiscal year 2026 guidance until the scheduled February 2026 investor event, alongside a long-term algorithm. Without concrete figures to reference, share performance is expected to continue following one-year U.S. same-store sales trends.
Brian Sozziis the Executive Editor at Yahoo Finance and part of the editorial leadership team at Yahoo Finance. Follow Sozzi on X@BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@Healthyurvival.
Every week, Yahoo Finance Senior Editor Brian Sozziinsightful discussions and chats with leading figures in business and finance on Opening Bid Unfiltered. You may discover additional episodes on our video hub or watch on your preferred streaming service.