Starbucks’ Big Sales Beat Stokes Confidence in Turnaround

Starbucks Corp. Chief Executive Officer Brian Niccol delivered the best evidence yet that his turnaround plan is taking hold, with the coffee chain posting unexpectedly strong growth and a solid outlook for the rest of the year.

Global sales at established locations rose 4% in the most recent quarter, the company said in a statement. That topped even the most optimistic analyst expectations and built on positive results from the previous period after a lengthy slump.

Starbucks on Wednesday also issued its first full-year outlook under Niccol. Sales from established locations are seen growing at least 3% in fiscal 2026, above the average of analyst estimates.

The shares rose as much as 9.5%, the biggest intraday gain since April. Before the results, Starbucks stock had risen 5% since Niccol took over in 2024, versus a 29% gain for the S&P 500 Index over that time.  Bloomberg's Michael Halen joins Bloomberg Intelligence to discuss.

“We are gaining greater conviction that turnaround strategies under new leadership will be effective in transforming Starbucks into a better company,” Baird analyst David Tarantino said in a note to clients.

Niccol’s strategy has focused on improving service and speed while reducing menu complexity. It’s a massive undertaking; Starbucks operates tens of thousands of locations across 80 countries. The company is also working to make its stores more inviting so customers linger and order more.

Starbucks said in a call with analysts that it has so far renovated about 200 of its coffee shops, with plans to refresh more than 1,000 by the end of the fiscal year.

In the US, Starbucks’ most important region and the focus of the turnaround, sales rose 4% last quarter, which the company attributed to a rise in both transactions and dollars spent per checkout.

Prior to Niccol’s arrival, Starbucks invested in technology and focused on online and mobile orders in a bid to get more customers in and out as fast as possible. This alienated some customers and backfired when baristas’ workflow was altered, creating delays.

Read More: Starbucks Is Desperate to Cut the Wait for 383 Billion Lattes

While digital sales remain an important sales driver for the company, Niccol has sought to refine its systems to let baristas better balance online and in-store orders. Starbucks has started to close down its pickup-only stores or convert them to full-service cafes.

While analysts and investors are largely positive on Niccol’s turnaround initiatives, some have questioned the total cost and their impact on earnings, with profitability blunted by heavy operational investments. Operating margins shrank last quarter and adjusted earnings fell to 56 cents a share, below Wall Street estimates. Starbucks said higher labor costs associated with the chain’s turnaround and an increase in the cost of coffee hurt profitability.

The company said those pressures should ease in the second half of the year. Starbucks expects adjusted operating margin to improve slightly year over year, and sees adjusted earnings per share in the range of $2.15 to $2.40.

Niccol said during a call with analysts Wednesday that the company has identified $2 billion in cost reductions over the “next couple years.”

Plans to streamline the company include the previously announced sale of 60% of its struggling China business to Boyu Capital. Niccol has also closed hundreds of underperforming North American stores and eliminated corporate jobs.

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