Despite falling sales, Starbucks CEO Brian Niccol contended Tuesday that the Seattle-based coffee chain is on the right path," to build a better customer experience as its quarterly revenue continued to grow.
The Seattle-based coffee chain reported $9.5 billion in third quarter revenue, a 4% increase from the same period last year. The revenue results for the quarter that ended on June 29 beat some analyst expectations.
"This quarter, we've made meaningful progress, and we are ahead of our expectations," Niccol said on the Tuesday earnings call. "We're fixing the operational foundations of the business and building a platform for innovation in 2026."
However, the company's profit at $558 million was almost half of what it reported for the same quarter last year. Earnings per share were 49 cents, down from 93 cents a year earlier.
"While our financial results don’t yet reflect all the progress we’ve made, the signs are clear — we’re gaining momentum," Niccol said.
Niccol plans to focus on building up Starbucks' delivery business, speeding along the roll out of its customer service operating model, Green Apron Service, and launching "the coffeehouse of the future," a redesigned coffee shop that costs less to build.
Starbucks plans to launch the coffeehouse prototype, which features 32 seats and a drive-thru, in fiscal year 2026. A small-format version in New York City is set to open its doors in the next few months.
The company will also introduce protein cold foam in the fourth quarter, playing on the national fixation of protein intake, and phase out its mobile order and pickup only concept in fiscal year 2026.
"We found this format to be overly transactional and lacking the warmth and human connection that defines our brand," Niccol said.
Before the earnings call, analysts anticipated the launch of the Green Apron Service would lead to rising labor costs and higher store sales.
Still, comparable sales worldwide fell 2% — as did comparable sales in the U.S. "We are clearly in the early stages of our turnaround in the U.S., but our work is gaining momentum," Niccol said.
In particular, Niccol said the brand is making headway among Generation Z and Millennials, which make up more than half of the company's customer base.
Green Apron Service is being tested as a pilot program across 1,500 stores. Niccol said those coffeehouses have experienced improved transactions, sales and customer service times.
The company ended the third quarter with a total of almost 41,100 stores, including 308 new stores globally. While the U.S. is home to 17,230 stores, China has around 7,800 Starbucks locations.
Niccol said his company is working to find a partner in China to focus on its presence in the Asian country and has fielded interest from more than 20 parties in the opportunity. Reuters reported last month that Starbucks was talking with potential buyers for its Chinese arm. The company then said that it wasn't interested in "a full sale."
"We remain committed to our China business," Niccol said. "We will only enter a transaction if it makes sense for Starbucks."
However, he noted that Starbucks has slowed down on major renovations and construction of new locations in general.
Instead, Starbucks is allocating $150,000 per store to improve existing locations. That work is starting in New York City and will expand to Southern California in the fourth quarter. Niccol highlighted a goal of at least 1,000 "uplifts," or revamped stores, nationwide by the end of 2026.
Niccol's remarks come about 10 months into his tenure. After he replaced former CEO Laxman Narasimhan last September, Niccol spearheaded a decision earlier this year to lay off 1,100 corporate workers. Since then, he's imposed several new corporate policies, including a stricter return-to-office mandate.
"We're not just getting back to Starbucks," Niccol said Tuesday. "We're building a better Starbucks.
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