Starbucks falling this morning after reporting weaker than expected second quarter results yesterday after the close as the company says its turnaround plan is still brewing. Let's toss it on over to Yahoo Finance executive editor Brian Sazy for his conversation with Starbucks CEO Brian Niccol. Saz.
All right, thanks so much Brad. Brian, always nice to get some time with you after this earnings day. I'm sure you saw that GDP contracted three-tenths of a percent, but first a decline since 2022. Through the lens of Starbucks, Brian, does this look like a contracting US economy?
You know, look, that's a great question as it relates to what we're seeing in our Starbucks business. If you look at our results, what I'm seeing actually is a step up in transactions as it relates to our business in the US. We had our best quarter as it relates to sales comp in the last five quarters. And so we're continuing to see progress in the Starbucks business with customers. And that's going to continue to be the case and that's what is part of a turnaround is you stabilize the business and then you build back better with our customers and with our partners in the store and that's what we're after doing.
Brian, but the North America same store sales still down 1%. When the Starbucks customer comes into the stores in this economy, are they pulling back? Are they perhaps reaching for a hot coffee instead of a larger iced one? Are they not buying the pastry?
You know, we're not seeing a change in the basket. So when they come in, the attach has been pretty much the same as far as customization or adding on food. And you know, I think frankly what we're focused on is how do we bring customers back into our stores so that they experience a great seat, a great vibe, they get that connection with our baristas and then they obviously get the craft beverage that they want on the right speed of service. And that's really what we've been making progress on. I think at the end of the day, our great craft with our great barista connection in these terrific coffee house experiences are what sets the brand apart and that's what's going to be the foundational piece that turns this business around.
Brian, why do you think there is that disconnect? Just listening to what you're saying trend-wise, of course, I know you sit on that Walmart board too as well. Just given your vantage point, why do you think there is still that disconnect between what the economy is doing and what you're seeing inside of Starbucks?
Yeah, look, I think consumers obviously are feeling some pressure. There's no doubt that you're seeing consumer sentiment go down over the last couple months. But I do think they're still being very choiceful in where they want to spend their money. And you know what I want to make sure is I give them the experience where they feel great about the dollars that they spend at Starbucks. And that's what we're focused on. If we can give people a differentiated experience with great coffee, great drinks, great food, they will continue to come back and they will allocate their hard-earned dollars to the Starbucks business. And you know, that is what we need to deliver on and that is what we need to make sure the customer is saying to us, which is you guys are giving me a great experience. You're giving me the great products that I want and you're doing it on my time schedule. I think, you know, we'll continue to always get more than our fair share of that wallet and that's what we're after.
Brian, you mentioned on the earnings call last night being quote disappointed in the corner. Is the turnaround at Starbucks taking longer than you thought?
You know, look, I never like to have negative sales or earnings that aren't growing. And so we got to be honest with the reality is the results weren't great in the quarter, but when you look behind the scenes, there was a lot of great things happening. We said the Back to Starbucks program was all about getting back to great speed of service or throughput and great connection in a great coffee house with engaged partners that are set up for success. That's what's happening. If you look at the algorithm test for technology, we've taken about two and a half minutes out of the cafe drink experience. If you look at the drive-thru, I think we've pulled out close to 30 seconds of speed in the drive-thru. So now pretty much every order is less than four minutes there. We've improved our on-time and accuracy in the mobile order. And then we've really got a lot of understanding of what the right staffing levels are, the right deployment so that our baristas are set up for success to do the craft that they love to do and the connection that they love to provide. Whether it's writing on the cups, saying hello at the handoff, or just knowing their customers order. So, look, there's a lot of great things happening in the quarter. The results not where we wanted them to be, but the progress on the Back to Starbucks plan exactly where we want to be.
Yeah, we're seeing the stock move, Brian. I mean, it's down, last time I checked, double digits, so under pressure. And you know, from the folks that I was able to talk with, they were surprised by that North America same store sales down 1%. I mean, do you have a timeline on when that business is back to growth?
Look, I think the timeline is when we start delivering great experiences for our customers and set the partners up for success to deliver those experiences, you will see the business grow accordingly. And that's what we're working on. And I'm confident, you know, that's what's in our future. I think you're going to see us grow, not just the top line, but also the bottom line. And this is what I keep talking about is like earnings is an outcome of us doing the right things in our business, both from a culture standpoint, a people standpoint, and a customer standpoint. We do all those things right, we'll get growth on the top line, and obviously we'll do everything we can to make sure that that growth travels to the earnings.
