Starbucks CEO’s turnaround isn’t happening fast enough for Wall Street

Over the past seven months, Starbucks has brought back ceramic mugs, TV and radio advertising, comfy chairs and Sharpies as part of a broader effort to turn around the company. Is it working?

CEO Brian Niccol thinks it is. Wall Street is not so sure.

Starbucks brought on Niccol in September to liven up the Seattle-based coffee chain’s sales and repair its reputation. The wild card popping up is a burgeoning and erratic trade war between the U.S. and China, Starbucks’ second largest market and a key supplier.

Both Niccol and Chief Financial Officer Cathy Smith told analysts during an earnings call Tuesday afternoon that the company’s financial results were below Starbucks capability. The company reported $8.76 billion in revenue for the first three months of 2025, missing Wall Street’s expectations of $8.82 billion. Starbucks chalked up $384.2 million in profit, roughly half of what it reported for the same period last year.

Starbucks share price fell 6% in after-hours trading.

Niccol, who joined the company from Chipotle, said he’s optimistic.

“If you take away anything from today’s call let it be this: we are putting the customer back at the center of all we do,” he said.

The coffee giant’s chief preached a relentless focus on the customer in the changes being made as part of his “Back to Starbucks” plan. And that focus is costing money. Stores are being renovated to recapture the feel of neighborhood hangouts, and more baristas are joining the ranks to get orders out to customers more quickly.

Niccol is Starbucks’ fourth CEO in as many years. He was hired away from Chipotle in a surprise announcement last August after his predecessor Laxman Narasimhan presided over a year of declining sales.

The desired financial results will take awhile, Niccol said. The company’s strategy going forward is to test, look for signs of progress, whittle down the cost per transaction and then scale companywide.

Customers are driving some of those changes. In response to feedback, Starbucks removed sugar from its matcha tea resulting in a 40% increase in sales for matcha drinks. This summer, it’s bringing back the best-selling edible-pearl-infused Refresher drinks.

Starbucks is also pumping the brakes on automated systems the company had planned for rushing cold drinks and hot food. Instead, those investments are being shifted to labor.

“We’re finding that investments in labor rather than equipment are more effective at improving throughput and driving transaction growth,” Niccol said.

Instead of automating the drinks, Starbucks has tested algorithmic decision-making. Baristas will make the drinks and food, the company’s technology will tell them which orders to prioritize, instead of the conventional first-come, first-served system.

Niccol said in the locations where the system has been tested, about 75% of orders had a wait time of under four minutes during peak hours, a primary goal for the company.

Starbucks laid off 1,100 corporate employees last quarter, 612 of whom were based in the Seattle headquarters. The company reduced open jobs as well, all in an effort to cut down on redundant roles.

Going forward, Starbucks isn’t immune to the looming effects of tariffs. The company imports coffee beans from 28 different countries, but Smith said the exposure may come from merchandise and beverage ingredients sourced from China.

Smith said the company has been trying to mitigate any volatile pricing by shifting, and is localizing production as much as possible.

On the coffee side, the company’s total cost of green coffee is limited to about 10% to 15% of product and distribution costs. Starbucks relies on a widespread network of sources and warehouses to tamp down any potential rising cost.

“Our intention is to not move on pricing for the rest of this fiscal year,” Niccol said.