(Reuters) -Starbucks Corp has suspended its annual forecasts as new CEO Brian Niccol looks to turn around the coffee giant struggling to stem waning customer demand, sending its shares down about 4% in after-hours trading on Tuesday.
The coffee chain also expects to report a decline in fourth-quarter sales and profit.
Niccol, who led a successful revival at Chipotle Mexican Grill, took over from Laxman Narasimhan on Sept. 9 at a time when the coffee chain struggled to tackle weakness in two of its top markets, the U.S. and China.
Starbucks needs to “fundamentally change” its recent strategy, Niccol said in a video released alongside Starbucks preliminary results.
“We will simplify our overly complex menu, fix our pricing architecture, and ensure that every customer feels Starbucks is worth it every single time they visit.”
The company expects fourth-quarter comparable sales to decline 6% as its in-app promotions did not help draw customers to its stores. Sales in China sales are expected to decline 14%.
“Despite our heightened investments, we were unable to change the trajectory of our traffic decline, resulting in pressures in both our top-line and bottom-line,” Chief Financial Officer Rachel Ruggeri said.
“We are developing a plan to turn around our business, but it will take time.”
Niccol has laid out his plan for the first 100 days focused on enhancing customer experience at its stores in the U.S.
He inherits several challenges at the coffee giant, which has been under pressure from activist investor to improve its business, and has suffered from increased competition and weakening demand in the United States and China.
Starbucks said it was suspending its annual forecasts for the year ending Sept. 2025 due to the CEO transition coupled with the “current state of the business.”
(Reporting by Aishwarya Venugopal in Bengaluru; Editing by Tasim Zahid and Sriraj Kalluvila)
