Starbucks shares rose 5% before the bell on Wednesday after the coffee chain raised its annual forecast, signaling CEO Brian Niccol’s turnaround plan was bearing fruit, helped by consumer demand and improved operations.
Niccol, who took over in September 2024, steered the world’s largest coffee chain with his “Back to Starbucks” strategy focusing on simplified menus, shorter waiting times and increased staffing, boosting customer satisfaction.
Customer traffic increased across all income cohorts, Niccol said, with average visits per Starbucks location up 5.9% in the quarter, according to Placer.ai data.
“The recovery is notable for its breadth, indicating the turnaround is structurally sound rather than dependent on a specific group,” analysts at Stifel said.
“Even lower-income consumers are re-engaging, perceiving Starbucks as a well-earned splurge.”
According to Morningstar: “Starbucks drove US spending growth across all income and age cohorts, which points to consumers’ appetite for on-trend innovation, even against a hazy macro backdrop.”
The effects of economic uncertainty have not shown up in consumer behaviour, with positive sales trends continuing through April, Niccol said.
At least five brokerages have raised their price targets on the stock after the quarterly results, per data compiled by LSEG.
Starbucks expects annual global same-store sales growth of about 5% or more, above its earlier expectations of at least 3%.
Despite higher sales, North American operating margins fell to 9.9% from 11.6% a year ago, reflecting increased labour investment.
Some analysts said margin pressures remain but expect improvement in the second half of 2026.
Shares in the company have gained about 15.5% so far this year and trade at a 12-month forward price-to-earnings ratio of 36.08.
Reuters
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