Starbucks Posts First Sales Growth In US In Two Years, But Investor Concerns Remain – CoffeeTalk

Starbucks has achieved its first sales growth in the U.S. in two years, attributed to CEO Brian Niccol’s efforts to refocus the brand on its coffeehouse origins. Niccol, who previously revived Chipotle Mexican Grill, is now under scrutiny as the company approaches its first investor day with expectations for strategic updates and long-term targets. The current turnaround process has been described as frustratingly slow by analysts, as they anticipate Niccol’s strategy will be pivotal for the company’s future.

Since assuming leadership in September 2024, Niccol has implemented the “Back to Starbucks” initiative, which includes simplifying the menu, offering freshly baked goods, and enhancing customer interaction with handwritten cups. Despite these efforts, there are challenges such as outdated technology and a disjointed supplier network hinder progress towards improving store efficiency and cutting service times to under four minutes.

Financially, Starbucks reported a 4% rise in comparable sales in North America during the first quarter, with a 1% increase in U.S. order spending driven by popular beverages like espresso and tea, alongside new protein-infused drink offerings. However, the company faces ongoing margin pressures, having experienced two consecutive years of margin declines due to substantial investments in store operations and recent import tariffs on coffee from major exporters like Brazil. These tariffs have contributed to a 290 basis point contraction in margins during the reported quarter.

Looking ahead, Starbucks projects a fiscal 2026 adjusted profit of $2.15 to $2.40 per share, slightly below analyst forecasts, while global same-store sales are anticipated to reach a growth rate of 3% or higher. The company has also sold control of its operations in China to Boyu Capital due to ongoing struggles in that market, although quarterly sales improved by 7%, outpacing previous gains. Overall, while initial signs of recovery are evident, the need for a substantial turnaround in margins remains critical for Starbucks’ long-term success.

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