Starbucks is cutting corporate holiday bonuses by 40%, signaling a challenging year for the coffee giant.
The decision comes after the company reported its worst performance since the pandemic, struggling with rising costs and waning customer demand, the New York Post reported.
Despite slight revenue growth of less than 1% for the fiscal year ending September 29, operating income dropped 8%, and global same-store sales declined by 2%. This marks only the second such sales dip in 15 years, with the first occurring during the 2020 lockdowns.
The Seattle-based company has attributed the downturn to various factors, including customer backlash over menu price hikes and political controversies.
The long wait times—up to 40 minutes in some locations—have further frustrated patrons.
Starbucks has acknowledged these challenges and plans to address them with operational changes, including adding baristas to reduce wait times and reimagining stores as welcoming spaces.
New CEO Brian Niccol, who joined in September, is spearheading these changes.
Niccol aims to bring back Starbucks’ iconic “third place” experience—spaces between home and work where customers can relax. He also announced plans to modernize store designs and focus on efficiency to regain customer loyalty. During a recent earnings call, Niccol stated, “We are moving quickly to return Starbucks to growth.”
The bonus cuts reflect the company’s weak financial performance, which impacts employee payouts. Bonuses are calculated based on personal performance and company-wide results, meaning even top-performing workers will see reduced amounts. Senior vice presidents and executives will face larger cuts, and unlike other employees, they will not receive merit raises this year.
While Starbucks has made some gains, with shares rising 7.5% in 2024, it still lags behind the S&P 500’s 27% growth during the same period. The chain faces growing pressure to innovate and recover its market position. Niccol’s strategy includes rebranding efforts and operational improvements, which Starbucks hopes will reinvigorate customer interest and drive future growth.
As Starbucks navigates its financial woes, its commitment to transforming operations and customer experiences will be pivotal in reclaiming its dominance in the competitive coffee market. Whether these efforts will brew success remains to be seen.