Starbucks signals U.S. growth revival as CEO Niccol's turnaround takes hold

Summary

• U.S. comparable sales rise 4% in the first quarter, the first gain in nearly two years
• CEO Brian Niccol’s restructuring and menu overhaul begin to show results
• Shares jump 10% after earnings as Starbucks reinstates full-year targets

Starbucks delivered stronger-than-expected first-quarter results on Wednesday, pointing to a rebound in U.S. demand and early progress in CEO Brian Niccol’s turnaround strategy.

Shares surged nearly 10% following the earnings release, lifting the stock’s year-to-date gains to around 14%, ahead of the company’s first investor day under Niccol scheduled for Thursday in New York.

“We are now delivering the top-line results we set out to achieve,” Niccol said on the post-earnings call, as the coffee giant works to re-energize its U.S. business and fend off competition from newer café chains.

Strategic focus on core offerings

Starbucks has aggressively simplified its U.S. menu, eliminating nearly 30% of items by the end of 2025. Underperforming products — including the Oleato olive-oil beverage line and several frappuccinos — were removed to refocus on core espresso drinks and higher-margin offerings.

The company has also rolled out premium additions such as protein cold foam and protein lattes, targeting customers seeking both convenience and value-added products.

Comparable sales in North America rose 4%, marking the first increase in almost two years. Starbucks has simultaneously closed hundreds of underperforming locations — including its flagship Seattle Roastery — while investing in store operations and efficiency upgrades.

Customer traffic received a boost from promotional events such as Red Cup Day in December and the holiday merchandise launch of the Bearista Cold Cup in November, according to foot-traffic data.

Outlook and margin pressures

Starbucks reinstated its full-year guidance, projecting fiscal 2026 global same-store sales growth of at least 3%, above market expectations.

First-quarter global comparable sales climbed 4%, beating analyst forecasts.

However, profitability remains under pressure. Higher raw coffee costs driven by last year’s import tariffs and increased spending on store operations weighed on margins, which fell 290 basis points during the quarter.

Although coffee tariffs have since been rolled back, cost pressures continue to affect earnings.

Starbucks now expects fiscal 2026 adjusted earnings of $2.15 to $2.40 per share, with the midpoint slightly below analyst estimates.

Why This Matters

Starbucks’ first U.S. sales growth in nearly two years is a key signal that consumer demand may be stabilizing after a prolonged slowdown in discretionary spending.

More importantly, it suggests CEO Brian Niccol’s restructuring — from menu simplification to operational efficiency — is beginning to gain traction.

For investors, the rebound strengthens confidence in Starbucks’ turnaround narrative while highlighting ongoing margin risks tied to costs and operational investments. For the broader retail sector, the results point to cautious recovery in consumer traffic amid inflation-driven pressures.

FAQs

Q1. How did Starbucks perform in the first quarter?

U.S. comparable sales rose 4%, marking the first growth in nearly two years.

Q2. What changes has CEO Brian Niccol made?

He trimmed roughly 30% of U.S. menu items, focused on core beverages, introduced premium products, closed underperforming stores, and invested in operational efficiency.

Q3. How are margins performing?

Margins declined 290 basis points, impacted by higher coffee costs and store investment.

Q4. What is Starbucks’ outlook for 2026?

The company expects global same-store sales growth of at least 3% and adjusted earnings of $2.15–$2.40 per share.

Q5. What drove customer traffic growth?

Promotional events such as Red Cup Day and holiday merchandise launches boosted store visits.