Coffee drinkers return to Starbucks: chain's US sales up for first time in two years

Starbucks, the world's largest coffee chain, reported sales growth in the U.S. market for the first time in two years. The quarterly results showed that the strategy of the new management to bring visitors back to Starbucks is bearing fruit, despite the pressure of increased profit costs. Shares of the coffee chain rose 9.5% after the report was released. However, Wall Street analysts are divided on whether to buy them.

Starbucks reported comparable sales growth in all regions for the first quarter of fiscal 2026, ending December 28. In the US, the company's largest market, growth was driven primarily by more frequent orders from customers: comparable sales (a measure used in the retail industry that excludes new establishments) increased by 4%. This is the first increase in two years, the FT notes. Total revenue rose 6% to $9.9bn, beating analysts' expectations of 2.5%.

However, Starbucks' strategy of bringing customers back to Starbucks has proven costly: investments in staff and coffee shops have eroded profits, while duties on coffee imports have put additional pressure on profitability, Yahoo Finance wrote. In the first quarter, Starbucks' profit fell 62% to $293.3 million.

Starbucks unveiled its first annual forecast under CEO Brian Niccol, who started in September 2024: the company expects sales to grow at least 3% in fiscal 2026.

In trading on January 28, Starbucks shares soared 9.5%, hitting their highest level since last October. Since Niccol became head of Starbucks, the company's shares have risen 6.3%, while the S&P 500 index has climbed 29% over the identical period.Analysts are divided in their recommendations on the company's stock, according to data from Marketwatch. Of the 38 analysts covering Starbucks, 18 recommend investing in their buy, while 15 advise not buying but holding existing securities in the portfolio.

The growth of Starbucks sales confirms that Niccol's initiatives to win back consumers are beginning to yield results, Bloomberg writes. In the annual letter to shareholders, the head of the company told how Starbucks coped with the crisis. The company has significantly invested in training employees of coffee shops, providing them with better working conditions in terms of schedule and a new system of benefits, thus reducing the turnover to a record minimum. The interior of the coffee shops is being updated to increase the sense of coziness to ensure that customers spend more time in the coffee shops, Niccol adds.

In addition, visits to Starbucks coffee shops surged in the quarter amid the launch of holiday drinks, the annual Red Cup Day promotion and the launch of the popular Bearista cup. "We are increasingly convinced that business recovery strategies under a new leader will be effective in transforming Starbucks into a more successful company," Baird analyst David Tarantino told Bloomberg.Last November, Starbucks agreed to sell a controlling stake in its China business and closed hundreds of coffee shops in the U.S., laying off more than 900 employees, cutting corporate positions and completely revamping its top management staff, The Wall Street Journal reported.

Bloomberg notes that while analysts and investors are generally positive about Niccol's reforms, some question the overall cost of the transformation and its impact of operating expenses on profitability. Last quarter, adjusted earnings fell to 56 cents per share - largely due to higher staffing costs as part of the reforms and higher coffee costs. The company's profit has declined at double-digit rates for six consecutive quarters.

"To justify the significant cost and improve performance, Starbucks will need to keep attendance high through the second half of fiscal 2026," Jefferies analyst Andy Barish wrote, as quoted by Bloomberg.

This article was AI-translated and verified by a human editor