Starbucks has raised its annual sales and profit forecasts for the second time, as CEO Brian Niccol's multi-year turnaround strategy continues to revive demand at the world's largest coffee chain. The upbeat outlook sent the company's shares up 5% in extended trading, with the stock having advanced 23% this year through Wednesday's close, more than three times the gain of the S&P 500 Index. According to reports from Reuters, the Seattle-based company now expects global same-store sales growth of around 6%, up from its previous forecast of about 5% or higher. It also expects adjusted earnings per share of $2.55 to $2.65, compared with its earlier guidance of $2.25 to $2.45. CFO Catherine Smith noted that for the year, Starbucks expects US same-store sales growth to be 'a little more than' 6% and global same-store sales growth near 6%, above previous expectations for global and US comparable store sales growth of more than 5%. CEO Niccol acknowledged that "We have more work to do," while finance chief Cathy Smith said the company is focused on what it can control amid a "dynamic operating environment."
Starbucks delivered impressive third-quarter results, with global same-store sales growth of 7.9%, comfortably exceeding analysts' expectations of 5.7%, as reported by Reuters citing data compiled by LSEG. The company reported adjusted earnings per share of $0.85, higher than analysts' estimates of $0.66 and up from $0.50 per share in the same period last year. Revenue of $9.3 billion came in above the Street's $9.2 billion estimate but was down from $9.5 billion in the same period last year due to the transition of its China business to a joint venture. Consolidated quarterly operating margin improved to 14.4% from 10.1% a year earlier, surpassing estimates despite higher spending on store remodels, increased hiring in cafes and staff training. The company also noted that refunds received during the quarter 'largely offset' tariff-related costs incurred so far this financial year.
CEO Brian Niccol announced that Starbucks' 'Coffee House uplift' efforts have surpassed the goal of transforming 1,000 stores across North America by the end of fiscal 2026, with early data showing customers are visiting stores more throughout the day. Niccol aims to bring back the cozy, welcoming concept Starbucks was once known for — the 'third place,' where customers would spend time outside of their homes or work. In North America, sales popped 8.1%, also above the 6% increase expected as the chain leans into fruity flavors and cold foams, which drive up average check sizes. According to Reuters, Consumer Edge analyst Michael Gunther noted that "Starbucks has begun to experience market share stabilization in recent months, most notably with younger diners." He added that "Consumers may be shifting dining dollars toward in-home eating but are leaving room in the budget for daily drink habits." The company also noted that refunds received during the quarter 'largely offset' tariff-related costs incurred so far this financial year.
Starbucks has significantly accelerated its store renovation program, hitting its target to renovate 1,000 stores in North America ahead of schedule and now targeting 1,500 remodels by the end of September. The company is also cutting costs by streamlining its corporate structure, closing underperforming locations and selling a stake in its China business to a local partner. In November, Starbucks announced it sold a 60% majority stake in its China business to Boyu Capital in a deal valuing the business at $4 billion. A lineup of s'mores coffee drinks is the 'strongest' summer coffee limited-time offer launch in several years, demonstrating the effectiveness of the company's product innovation strategy. However, the 'Back to Starbucks' strategy, which involves heavy investment in staffing and store operations, has been pressuring margins, which the company has attempted to tackle with cost cuts through layoffs, office consolidation and streamlining its operations.
"We are encouraged by our strong start to the quarter but also recognize the year-over-year traffic comparisons we will lap and the continued variability in the broader consumer landscape," CFO Catherine Smith said. The company's improved performance reflects the effectiveness of its customer-focused transformation strategy in a challenging operating environment, with the sales recovery outpacing profit growth due to strategic investments in store improvements and operational excellence. Starbucks expects US same-store sales to be up 6.5% or higher in the fourth quarter, indicating continued momentum in the company's turnaround plan. Under Niccol, who took the helm nearly two years ago, the company has aimed to improve customer experience through a simplified menu and shortened wait times, fuelling four straight quarters of comparable sales growth and helping Starbucks offset a broader sector slowdown due to consumer belt-tightening amid rising cost of living.
