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Starbucks is completely revamping its approach under CEO Brian Niccol as the year 2026 draws closer.
"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 make 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 company is also seeking menu creativity and fresh methods to increase morning customer visits, such as introducing "protein-focused" breakfast options and handcrafted pastries. Starbucks is expanding its range of protein-based beverages and 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 revealed plans to shut down underperforming stores and reduce corporate positions in an effort to boost profitability and redirect resources toward employee hours at stores and product development.
The company intends to cut its number of stores by approximately 1% in Canada and the United States this fiscal year. By the end of the year, the total number of company-operated and licensed stores in the US and Canada will be close to 18,300 — a decrease from roughly 18,842 at the conclusion of the third fiscal quarter.
Starbucks is also removing 900 non-retail positions and will not fill vacant roles. The overall restructuring initiatives are expected to cost approximately $1 billion.
These initiatives come in addition to Niccol reintroducing condiment bars, retraining staff, revamping menu creativity, updating the brand's TV presence, and seeking a partner for its China operations. Starbucks has also pledged to renovate 1,000 stores to restore seating areas and add 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 integrated into the community, where if you're there and watch your community members come and go, you have the chance to greet your neighbor, friend, or family member," Niccol stated.
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. toward the end of the quarter, and a "wave" of new beverage and food offerings over the next 12 months. Starbucks plans to invest $500 million in labor improvements over the next year, which is less than the $1 billion that had been speculated on Wall Street.
The firm subtly hinted at the possibility of achieving peak operational profits once more.
Starbucks shares have fallen 10% so far this year, while the S&P 500 has increased by 14%.^GSPC).
Starbucks is set to reveal 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 closures might have confused the protein launch, and (2) increasing indications that overall industry demand has declined," Citi analyst Jon Tower wrote in a note.
This vulnerability," Tower remarked, "combined with an ongoing decision regarding China, could indicate that management holds off until the scheduled February 2026 investor event to present fiscal year 2026 guidance along with a long-term algorithm. Without concrete figures to rely on, stock performance is expected to remain aligned with one-year U.S. same-store sales data.
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.