Starbucks is slashing its corporate employees’ holiday bonuses by 40% as the coffee giant has suffered its worst year since it got slammed by the pandemic in 2020, according to a report.
The wimpy bonuses — which are usually paid in December — reflect Starbucks’ struggle in the fast-food industry as cash-strapped customers cut back on pricey lattes and frappucinos due to menu price hikes.
The Seattle-based company, in particular, has seen sales slump as problems have persisted across its chains, like extremely long wait times of up to 40 minutes for a java fix or a boycott linked to the company’s perceived stance on the war in Gaza.
Many of the coffee chain’s corporate workers will only be paid 60% of their overall bonuses, a person familiar with the matter told Bloomberg.
Most staffers’ bonus payout is calculated based on personal performance and company results — so even Starbucks employees who met their personal goals this year will receive smaller paychecks because of the company’s weak earnings, the source said.
The portion of the bonuses based on company performance takes revenue and operating income into account, according to a document reviewed by Bloomberg.
Starbucks’ revenue ticked up less than 1% in the fiscal year ended Sept. 29 — a far cry from the double-digit increase seen in previous years. The company’s operating income dropped 8% in the same period.
Starbucks’ global same-store sales fell 2% this fiscal year — only the second such drop in the last 15 fiscal years, with the first dip occurring in 2020 when lockdown restrictions cratered the restaurant industry.
Though the sales miss was partially offset by a 2% rise in customers’ average spend thanks to price hikes, the company’s new CEO Brian Niccol — who took the helm in September — is trying to turn around Starbucks’ business by making locations more welcoming and comfortable for customers, reminiscent of the chain’s early days.
“It is clear we need to fundamentally change our strategy to win back customers,” Niccol said during the latest earnings call. “We have a clear plan and are moving quickly to return Starbucks to growth.”
Starbucks did not immediately respond to a request for comment.
So far, Niccol has called for extra barista positions to boost efficiency and cut down on long lines, as well as location revamps to position Starbucks as a “third place” for customers in between their workplace and home where they can linger and enjoy sugary treats.
US employees’ bonus goals range from 5% of base pay for rank-and-file workers to 45% of base pay for senior vice presidents, according to the document obtained by Bloomberg.
Starbucks’ company performance weighs more heavily in the bonus calculation for senior vice presidents and executives, so these employees’ bonuses will likely be hit hard.
These senior positions will also not be eligible for merit raises, unlike other employees, a source said.
Starbucks shares have risen 7.5% to $100.68 so far this year — far below the S&P 500’s 27% growth in the same period.