Laxman Narasimhan, Starbucks’ new CEO has indeed praised the company’s financial performance. However, he suggested that the stores can perform better to meet demand. The media said he missed mentioning about the unionizaton drive sweeping through stores. During an analyst call he argued that the company’s performance is indeed strong. However, the company’s health could be stronger.
Based on April 2 in the quarter ending, the sales of the company-operated Starbucks stores jumped 11% globally. In addition, it includes a 12% increase in North America. Meanwhile in China, Starbucks has been hampered due to Covid restrictions. Thus, sales at stores jumped only 3%. This is somehow a better result than the company expected.
However, although it is performing positively, Starbucks reiterated its original outlook for the year. Rachel Ruggeri, Starbucks’ CFO warned that the company’s annual earnings per share growth in the current quarter is meaningfully low. Especially, the comparison is with the company’s fiscal year guidance range of 15% to 20%. It means that Starbucks shares jumped about 5% after the bell.
In this case, Narasimhan sets room for improvement in Starbucks. He said that there is more work to tailor the stores on the demand. It means that the company should advance technology, enhance innovation and equipment. More importantly, the company should get back to focus on fundamental operations in order to execute better.
He argued that Starbucks’ innovation this time should be more purposeful and targeted. In addition there have been many out-of-stock items. Thus, there are ways to create behind-the-scenes operations that are efficient. He mentioned that the business should be like having theaters to the front with a factory in the back.
