Starbucks signals U.S. growth revival as CEO’s turnaround takes root

Peter Saleh, managing director & analyst at BTIG, joins BNN Bloomberg to discuss Starbucks as the company reports earnings amid expansion plans.

Starbucks recorded its first sales growth in the U.S. in two years on the back of CEO Brian Niccol’s efforts to return the company to its coffeehouse roots, though investors were still concerned about sinking margins.

The company poached Niccol from Chipotle Mexican Grill, where he revived the burrito chain after a salmonella scare and rolled out the popular drive-through option ‘Chipotlanes’.

All eyes are now on Starbucks’ first investor day under Niccol on Thursday with expectations that the CEO could unveil a much-awaited strategic update and long-term targets.

“It has been frustrating in terms of the length of this turnaround... there’s a general feeling (among investors) now that tomorrow is going to be a big day,” said Nick Setyan, analyst at Mizuho Securities.

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Since taking the top job in September 2024, Niccol has pushed for a simplified menu, freshly baked food and cups with handwritten messages as part of his “Back to Starbucks” initiative.

One of the goals under the plan is to cut back service times and improve in-store efficiencies through its investment-heavy “Green Apron” program, but there, Niccol is facing outdated technology and a splintered supplier network, Reuters reported.

Starbucks was still at times falling short of its target to keep service under four-minute, the CEO said on a post-earnings call on Wednesday.

“The strategic investments we are making to fix our operating foundations will take time to flow through to sustainable earnings growth,” Niccol added.

Shares, which have risen about seven per cent since he took charge, were up about two per cent on Wednesday, paring most of the early gains. They have climbed about 14 per cent this year through Tuesday’s close.

Comparable sales rose four per cent in North America in the first quarter.

Money spent per order grew one per cent in the U.S., driven by espresso and tea-based beverages and the increasing popularity of its cold-foam options, finance chief Cathy Smith said.

Protein-infused drinks, launched late last year, were also drawing in customers, executives said.

Need turnaround on margins

Margins have not risen for two years straight, hurt by the company’s investments in store operations, and by import tariffs over the last year on key coffee exporters such as Brazil.

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While the U.S. has rolled back tariffs on coffee, raw bean costs are already high due to the duties paid over last summer. Margins contracted by 290 basis points in the reported quarter.

“The acceleration in the comparable sales is enough in the near term. Over the next, let’s say, year, the operating margins need to start improving as well,” Mizuho’s Setyan said.

Strong 2026 sales forecast

The company projected fiscal 2026 adjusted profit to be US$2.15 to US$2.40 per share, the midpoint of which is below estimates of US$2.35. It expects tariff pressure to start easing in the back half of the year.

Starbucks estimated fiscal 2026 global same-store sales to grow three per cent or higher, compared with estimates of a 2.94 per cent rise.

In November, Starbucks sold control of its operations in China to Boyu Capital after years of struggling with weak sales in the region.

Sales in the region rose seven per cent in the quarter, compared with a two per cent rise in the preceding three-month period.

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Reporting by Juveria Tabassum in Bengaluru; Editing by Sriraj Kalluvila