Starbucks is staying in Seattle as the struggling chain tries to get back to its coffee core.
New CEO Brian Niccol — who previously served as CEO at Chipotle (CMG) — plans to keep the company close to its humble beginnings. The global giant got its start at Seattle’s historic Pike Place Market in 1971.
“[Moving] right now is not on the list of things to do,” Niccol told Yahoo Finance. “What I’m focused on is how do we make sure we get back to Starbucks in the stores … We’ve got to make sure we’ve got a great culture at the Seattle support center, our New York support center, our Chicago support center.”
Niccol has been focused on his “Back to Starbucks” plan, unveiled shortly after he took over in September. The initiative aims to simplify the menu, provide speedier service, reestablish stores as a community coffeehouse, and build better relationships with store crews.
The company’s shares have gained less than 4% this year, far lagging S&P 500’s 20% rise.
In an aerial view, the Starbucks headquarters is seen at Starbucks Center on July 3, 2024, in Seattle, Wash. (David Ryder/Getty Images) ·David Ryder via Getty Images
Investors have been curious if he’d execute a similar plan to the one he enacted at Chipotle, where he uprooted the burrito chain’s headquarters from Denver and moved to Irvine, Calif. Starbucks has allowed Niccol to continue working from the Golden State.
“A relocation of Starbucks from Seattle not only would accelerate the search for talent (see the past history with Chipotle), but would also help Starbucks modernize its image,” Bernstein analyst Danilo Gargiulo said in a client note. “We believe that, in a world that is becoming increasingly divided, investors would benefit from greater perceived neutrality of the brand toward social and political issues associated with Seattle-location.”
But Starbucks and Seattle have been intertwined since day one.
The company was founded by Jerry Baldwin, Gordon Bowker, and Zev Siegl. Its first location in Pike Place was run by a single employee and mostly sold whole-bean coffee. By the early 1980s, Starbucks had four stores in the Seattle area.
Enter Howard Schultz as the head of marketing in 1982. A year later, a 30-year-old Schultz made his first trip to Italy and became enamored with the country’s coffeehouse culture. He returned with a desire to open many more Starbucks locations but was rebuffed by the original founders, who preferred to stay coffee bean-focused.
Frustrated, Schultz left Starbucks in 1985 and started his own coffee chain, Il Giornale. By March 1987, Baldwin and Bowker (Siegl had left years earlier) decided to sell Starbucks to Schultz — who folded Il Giornale into its operations.
Schultz went on to lead the company as CEO for decades, and is seen by many as the founder of the modern-day Starbucks. He left his CEO position several times only to return to fix operations.
In his last stint, Schultz served as interim CEO for a year before handing over the baton to Laxman Narasimhan in April 2023. Narasimhan was fired in August after Starbucks reported quarters of disappointing performance.
In joining Starbucks, Niccol also received the chairman title, a significant signal to investors he would have full control over the company (Schultz has retired from the board and holds the title of chairman emeritus).
A sign outside of the Starbucks headquarters is seen at Starbucks Center on July 3, 2024 in Seattle. (David Ryder/Getty Images) ·David Ryder via Getty Images
A Seattle HQ could be the case for quite some time, as Niccol tackles a very hefty to-do list to get the business back to sales growth.
Top priorities include making drinks in four minutes or under, ensuring proper staffing in stores, providing proper tools and equipment to employees, fixing a cumbersome mobile order experience, and bringing back personal touches alongside new store designs.
The company is working on value as well, with plans underway to eliminate the upcharge for alternate milks starting Nov. 7 and not increase prices for the next fiscal year.
“We’ll be knocking down those things over the coming weeks, coming months, and I do believe it will get us back to Starbucks,” he said. “We’re making progress on the things that we can do quickly, but with an eye towards how we get back to Starbucks and turn this business around permanently.”
In Q4, US same-store sales cratered 6% year over year, with a 10% decline in foot traffic. International same-store sales dropped 9%.
“I would love to see the foot traffic start to turn around to drive that same-store sales growth… That’s going to be a key piece of the puzzle for us going forward,” Niccol said regarding the business stateside.
“We want to give people the customer experience, the brand experience that results in them coming to Starbucks every single time for their drink occasion and hopefully that breakfast morning occasion,” he added. “We want to win the morning and then obviously we’ll grow the business from there.”
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
