SEATTLE, Washington: Starbucks is shifting course on its store strategy—putting people ahead of machines. The coffee giant announced plans to increase staffing in thousands of U.S. locations while scaling back on its earlier automation rollout, in a move that bucks the prevailing trend in the food service industry.

CEO Brian Niccol, who took over in September, told investors this week that the company will prioritize labor investments over equipment upgrades to improve the in-store customer experience.

"Over the last couple of years, we've been removing labor from the stores, I think, with the hope that equipment could offset the removal of the labor," Niccol said on the company's quarterly earnings call. "What we're finding is that wasn't an accurate assumption with what played out."

The company's North American same-store sales dropped one percent in the second fiscal quarter ending March 30, underperforming analyst expectations for a 0.24 percent decline. However, Starbucks noted that Canadian sales returned to growth during the same period.

Margins continued to shrink, marking the fifth consecutive quarter of declines. In the latest quarter, they contracted by 590 basis points.

Since taking the helm, Niccol has piloted increased staffing in five stores. The company now plans to expand that effort significantly: between 1,500 and 2,000 U.S. locations will add staff by May, with around 3,000 stores expected to follow suit by year's end. Niccol acknowledged the added labor would increase costs but sees the move as a long-term bet.

"We are banking on some growth to come with the investment in the labor and the store experience," he said.

Starbucks is also scaling back the rollout of its Siren system—a tech and equipment suite first introduced in 2022 to streamline beverage prep. Originally intended for a broad deployment, the system's reach was already narrowed earlier this year to top-performing stores. Now, Niccol says it will be installed only in "very targeted" locations with high drive-through and sales volumes.

The decision contrasts with the direction of other fast-food chains. For instance, Chipotle, where Niccol previously served as CEO, continues to pursue automation to control labor costs.