Operations
Despite a 2% decline in global comparable store sales and a 45% year-over-year decrease in EPS, CEO Brian Niccol is spearheading a turnaround strategy, focusing on operational enhancements, a revamped store portfolio and a wave of innovations.
Photo: SB
July 30, 2025 by Cherryh Cansler — Editor, FastCasual.com
After Starbucks Corp. reported mixed financial results for its third quarter of 2025, revealing a significant miss on earnings per share but a beat on revenue, CEO Brian Niccol is spearheading a turnaround strategy, focusing on operational enhancements, a revamped store portfolio and a wave of innovations.
“We are clearly in the early stages of our turnaround in the U. S, but our work is gaining momentum,” Niccol said during a Tuesday investor call.
The coffee giant posted an adjusted EPS of 50 cents, falling short of analysts’ forecasts of 65 cents by 23.08%. Revenue, however, came in at $9.5 billion, surpassing the projected $9.29 billion by 2.26%.
Starbucks’ stock declined 0.75% in aftermarket trading, closing at $93.44, reflecting investor concerns over the EPS miss. Despite a 2% decline in global comparable store sales and a 45% year-over-year decrease in EPS, Niccol remained upbeat.
“In our international business, our EPS in the quarter reflects the strategic investments we’re making in our Back to Starbucks strategy, like Leadership Experience 2025, which we believe will power our future growth,” he said. “While our financial results for the quarter don’t yet reflect all the progress we’ve made, I see meaningful signs from across our U. S.”
During the call, Niccol described five initiatives to help put the company back on top.
1. Operational overhaul and partner investment
A cornerstone of Niccol’s strategy is the “Green Apron Service” model, which is set to roll out across all U.S. company-operated stores by mid-August. Described as Starbucks’ largest investment in operating standards and customer service, focuses on establishing consistent, repeatable practices to enhance the customer and partner experience. The company is investing $500 million in labor hours to support the initiative, aiming to improve speed, hospitality and accuracy.
Early pilot results of Green Apron Service have shown promising improvements in transactions, sale, and customer service times, particularly during peak hours, Niccol said. SmartQ technology, the chain’s advanced order sequencing algorithm, is also being accelerated to ensure consistent service across all access points, including drive-thru and mobile orders
“Just eight weeks into our 1,500-store test, partner feedback has been tremendous,” Niccol said. “Peak transaction comps have already started to grow and all-day transaction comps are outperforming the broader North American portfolio. Where we’ve deployed SmartQ, we’ve seen a double-digit improvement in cafe orders handed off in under four minutes, with 80% of in-cafe orders now meeting that target. Drive-thru service times are consistently under 4 minutes, and mobile order and pay is more accurate and on time.”
2. Revitalizing the store experience
Starbucks plans to transform its physical store portfolio to foster a warmer, more welcoming environment. The company has slowed new store builds and major renovations to prioritize a “coffee house uplift program,” investing approximately $150,000 per store with minimal downtime. These uplifts aim to replace removed seating and introduce greater texture and warmth. The goal is to complete at least 1,000 uplifts across North America by the end of 2026.
3. Launching the coffeehouse of the future
Additionally, Starbucks is developing a “coffee house of the future” prototype. The standalone model, set to open in fiscal 2026, will feature 32 seats, a drive-thru and a roughly 30% lower building cost, Niccol said. A smaller format with 10 seats is also under construction in New York City. Conversely, the mobile order and pickup-only concept will be sunset in fiscal 2026, as it was deemed “overly transactional” and lacking the brand’s desired human connection.
“We believe this new prototype will deliver an exceptional customer experience, improve unit economics and unlock growth opportunities in more markets,” Niccol said. “We plan to complete an evaluation of our North American portfolio by the end of this fiscal year to ensure we have the right coffee houses in the right locations to drive profitability and deliver the Starbucks experience.”
4. More Innovation
The four walls aren’t the only area Starbucks is innovating, said Niccol, who said the chain is exploring upgrades to its digital expereiences, loyalty platform and its menu, including Protein Cold Foam and the launch of a reimagined artisanal baked goods case, a 1971 dark roast coffee, global flavors and customizable energy offerings.
“As we move further into 2026, expect more experiential beverages and nutritious satisfying bites for the afternoon daypart,” Niccol said. “This month, we’ll start testing new coconut water-based tea and coffee beverages in select markets.
Significant changes are also coming for the Starbucks Rewards program in early 2026, aiming to move beyond a “one size fits all” discounting mechanism to better recognize customer loyalty and engagement.
A new Starbucks app and enhanced mobile order and pay features are also in development.
“We have an incredible digital business, and in 2026, we’ll lean in further with a new Starbucks app and significant enhancements to mobile order and pay that will further improve our ability to deliver a great customer experience at pickup,” Niccol said.
5. Global growth and China strategy
Internationally, Starbucks saw its business exceed $2 billion in quarterly revenue for the first time. The company is exploring a strategic partnership in China, aiming to capitalize on future growth opportunities in that market.
“We’ve received significant interest from more than 20 interested parties, and we’re evaluating options,” Niccol said. “We remain committed to our China business and want to retain a meaningful stake. The intense interest in partnering with us is a testament to the great team, strong brand and long-term opportunity for Starbucks in China. It really is a vote of confidence.”
Moving forward
Despite the company’s challenges, Niccol said he and the team were building a better Starbucks and anticipates returning to pre-COVID margin levels of 17%.
“This transformation lays the operating foundation for an ambitious innovation agenda, and I’m confident by the (end of) 2026, Starbucks in the U.S. will look and feel very different, delivering the industry’s best customer experience,” Niccol said. “We’re not just getting back to Starbucks, we’re building a better Starbucks, where everyone can experience the best of our brand.”
