By Aishwarya Venugopal

(Reuters) – Starbucks Corp suspended its forecast for the next fiscal year as new CEO Brian Niccol aims to revitalize the coffee giant facing declining demand for its premium drinks.

The company reported preliminary fourth-quarter results, indicating declines in same-store sales, net revenue, and profit, primarily due to weak demand in the U.S.

Starbucks’ shares dipped about 4% in after-hours trading, although the stock has increased nearly 28% since Niccol’s appointment in early August.

Niccol, who assumed the role unexpectedly, stated, "It's clear we need to fundamentally change our strategy so we can return to growth, and that's exactly what we are doing with our 'Back to Starbucks (NASDAQ:SBUX)' plan."

He emphasized simplifying the "overly complex menu" and adjusting the pricing strategy.

The company predicts a 6% decline in comparable sales in the U.S. and a 14% drop in China for the fourth quarter ending Sept. 29, prompting it to suspend its annual outlook for the fiscal year ending September 2025.

Despite increasing investments, Chief Financial Officer Rachel Ruggeri acknowledged the ongoing decline in customer traffic: "We are developing a plan to turn around our business, but it will take time."

In a bid to reassure investors about the turnaround, Starbucks raised its quarterly dividend from 57 cents to 61 cents per share.

The company's rewards program did not boost customer traffic. As part of the turnaround, Niccol plans to revise marketing strategies, welcoming all customers instead of just "Starbucks Rewards" members.

William Blair analyst Sharon Zackfia expressed cautious optimism, noting that while Starbucks could return to positive comparable sales as fiscal 2025 rolls out, a reality check might be necessary regarding the timeline for restoring profitability.

Analysts anticipate that Niccol will explore various methods, including increasing labor hours at stores and reducing the frequency of limited-time promotions.

Previously, Niccol served as CEO of Chipotle Mexican Grill, where he addressed the company's challenges and revitalized its sales.

Taking over from Laxman Narasimhan, Niccol faces multiple challenges, including pressure from an activist investor to improve operations amid rising competition and weak demand in key markets.

In his initial address as CEO, Niccol mentioned his intention to "reestablish the brand as the community coffeehouse" in the U.S., outlining plans for his first 100 days.

His approach mirrors that of new Nike (NYSE:NKE) CEO Elliott Hill, reflecting a need for a fresh start after experiencing declining sales under former leadership.

Starbucks is set to conduct its scheduled fourth-quarter earnings conference call on Oct. 30.