In a move reflecting the ongoing challenges faced by the coffee giant, Starbucks has announced a significant reduction in holiday bonuses for its corporate employees, cutting them by 40% this year. This decision comes on the heels of what has been described as the company’s most difficult year since the pandemic struck in 2020, as sales continue to decline and customer spending habits shift.
According to a report from Bloomberg, many corporate employees will receive only 60% of their expected bonuses, which are typically disbursed in December. This reduction is particularly disheartening as it affects not only those who did not meet their performance targets but also employees who achieved their personal goals. The bonus structure at Starbucks is designed to reward both individual performance and overall company results, with approximately 70% of the bonus tied to financial metrics such as revenue and operating income.
Starbucks has seen its revenue grow by less than 1% in the fiscal year ending September 29, a stark contrast to the double-digit growth rates experienced in previous years. Operating income has also taken a hit, declining by about 8%. This downturn has been exacerbated by various operational issues across its stores, including excessively long wait times—sometimes reaching up to 40 minutes—which have frustrated customers and contributed to a decline in foot traffic.
The company’s struggles are further compounded by external factors, including rising inflation and an increase in menu prices that have led many customers to reconsider their spending on premium coffee beverages. As consumers tighten their budgets, Starbucks has felt the pinch, with global same-store sales dropping by 2% this fiscal year—the second decline in its last fifteen fiscal years.
New CEO Brian Niccol, who took over in September, is actively working on strategies to revitalize the brand and improve customer experience. “It is clear we need to fundamentally change our strategy to win back customers,” Niccol stated during the latest earnings call. His plans include reducing wait times and revamping store environments to make them more inviting for customers looking for a comfortable place to relax or work.
In addition to the bonus cuts for corporate employees, senior vice presidents and executives are expected to face even larger reductions in their bonuses and will not be eligible for merit raises this year. The new compensation structure emphasizes financial performance more heavily than before, with 70% of bonus allocations now linked to operating income and net revenue.
Despite these challenges, Niccol remains optimistic about turning things around. He has called for additional barista hires to enhance efficiency and reduce long lines at stores. The goal is not only to improve service but also to reposition Starbucks as a “third place” for customers—an inviting space between home and work.
Starbucks has not yet responded to requests for further comment regarding these changes or its future plans. However, as the company navigates these turbulent waters, employees and customers alike are watching closely to see how these strategies will unfold in the coming months.
As Starbucks grapples with these challenges, it remains committed to providing quality products while adapting to the evolving landscape of consumer preferences and economic pressures.
READ MORE:
