ii view: Starbucks sales benefit from recovery strategy

First-quarter results to 28 December 

• Revenue up 6% to $9.91 billion
• Adjusted earnings down 19% to $0.56 per share
• Global comparable store sales up 4%

Chief executive Brian Niccol said:

“Our Q1 results demonstrate our 'Back to Starbucks' strategy is working and we believe we're ahead of schedule. It's great to see the sales momentum driven by more customers choosing Starbucks more often, and this is just the beginning.”

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ii round-up:

Starbucks Corp (NASDAQ:SBUX) today detailed a second consecutive quarterly gain in same store sales as the global coffee chain continued to recover under its ‘Back to Starbucks’ transformation plan. 

First-quarter comparable sales to late December rose 4%, with a 3% improvement in transaction numbers combining with a 1% increase in selling prices. Wall Street had predicted a comparable sales gain nearer 2.5%. The drinks giant expects 2026 sales on the same basis of 3% or more. 

Shares in the S&P 500 company rose 4% having come into this latest news down 7% in 2025. That’s similar to Reborn Coffee Inc Ordinary Shares (NASDAQ:REBN) and pizza restaurant chain Papa John's International Inc (NASDAQ:PZZA). The S&P 500 index rose 16.5% last year. 

Net new store openings of 128 during the quarter left Starbucks operating 41,118 stores. Of those, 41% are in the US with China second at 20%.

Group-wide revenue for the quarter rose 6% from a year ago to $9.9 billion, exceeding forecasts of $9.67 billion. 

A near one-fifth decline in adjusted earnings year-over-year to $0.56 per share came given increased staff investments under the recovery strategy as well as higher costs for items including coffee itself. 

US and North American comparable store sales rose 4%, with those for China climbing 7%. Other international sales on the same basis, and including the UK, improved 5%.

Second-quarter results are likely mid-to-late April.   

ii view:

Started in 1971, Seattle headquartered Starbucks today operates in around 80 countries. Of the store portfolio, 52% are company-operated with the balance of 48% licensed or franchised. Along with the UK, other major countries of interest are Japan and Canada. 

For investors, the consumer backdrop remains tough, with government taxes rising in many countries and employment markets stable at best. Cost headwinds have included trade tariffs. Relations between the West and China, a key market for Starbucks, remain strained, while a forecast price/earnings (PE) ratio above the three- and 10-year averages may suggest the shares are not obviously cheap.  

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More favourably, CEO and former executive of Chipotle Mexican Grill Inc (NYSE:CMG), Procter & Gamble Co (NYSE:PG) and Yum Brands Inc (NYSE:YUM), Brian Niccol, is now pursuing a recovery strategy focused greatly on improving customer serving times. A diversity of geographical regions exists. New stores are still being opened, while a dividend yield of around 2.5% is not to be ignored. 

For now, and despite continuing risks, signs of strategy success will likely leave shares of this global coffee house on the watch list of many investors. 

Positives: 

• Diverse geographical footprint
• Ongoing recovery plan

Negatives:

• Elevated costs
• Currency moves can hinder

The average rating of stock market analysts:

Strong hold