Starbucks' new strategy has started to pay off. Shares soared after the report

Coffee chain Starbucks improved its outlook for fiscal year 2026 and beat analysts' expectations for revenue last quarter. It appears that Starbucks CEO Brian Niccol's strategy to revitalize the business, hired by the company in 2024, has begun to pay off, Reuters noted. Starbucks shares jumped 5% in extended trading on Tuesday after the reports were released.

Coffee chain Starbucks raised its fiscal 2026 adjusted earnings per share forecast for fiscal 2026 to a range of $2.25 to $2.45, the company said in a report. It had previously expected $2.15 to $2.4. Starbucks' global comparable sales outlook also rose to "5% or higher" versus a previous estimate of "3% or higher." Against the backdrop of the war between the US and Iran and its impact on the price of fuel, few companies have dared to raise their annual forecasts in recent weeks, CNBC emphasizes.

In the second quarter (ended March 29), Starbucks' global comparable sales, which includes only locations that have been in operation for more than a year, increased 6.2% due to a rise in the number of transactions. Wall Street had expected growth of about 4%, according to StreetAccount data, Reuters writes. According to Starbucks CEO Brian Niccol, the similar dynamics of comparable sales continued in April. The main contribution to growth was provided by the North American market. In the United States, comparable sales increased by 7.1% due to an increase in the number of transactions by 4.3%. Outside the US, growth was more subdued, with international comparable sales up 2.6%. The average number of visits per Starbucks location rose 5.9% in the quarter, Placer.ai data shows.

Starbucks' revenue in the second quarter of fiscal 2026, which ended March 29, rose 9% year-on-year to $9.53 billion. Wall Street, according to LSEG, expected $9.16 billion, CNBC reports.

Adjusted EPS came in at $0.5 versus guidance of $0.43. Net income of Starbucks in the second quarter increased by 33% to $510.9 mln.

Starbucks shares were up about 5% in extended trading Tuesday, rising above $102. In the main trading on April 28, they fell 0.6% to $97.3. The securities have added about 15.5% since the beginning of the year. By comparison, the S&P 500 broad market index has added only 4% over the same period.

The report shows that the Niccol-led relaunch strategy is starting to pay off, giving Wall Street more evidence that investing in coffee shop upgrades and increasing barista hours is driving demand, Bloomberg writes. Under Nicol's leadership, the company has cut discounts and focused on improving coffee shop operations, launching new products and bringing back seating. As a result, traffic at Starbucks coffee shops in the U.S. has grown for two consecutive quarters, CNBC notes.

"This quarter was an important milestone for Starbucks - and a turning point in our relaunch," Nichol said in a video released with the statements.

The CEO, hired in September 2024, focused on operational efficiencies in coffee shops. In particular, he pushed to simplify menus and reduce order wait times. Niccol also launched the Back to Starbucks initiative, which includes improving employee compensation to reduce turnover.

"The changes the company has implemented over the past 18 months are fully starting to take effect," Bloomberg quoted M Science analyst Matt Goodman as saying. - Menu innovations such as protein-enhanced drinks and energy drinks are supporting both traffic and growth in the average check."

During a conference call with analysts, the company's management noted that duties and high coffee prices have put pressure on profitability in North America. Starbucks, however, expects these factors to ease in the second half of the year. The company also said it plans to open 150 to 175 new coffee shops in the U.S. this year.

The most popular recommendation on Wall Street on shares of Starbucks - to hold (21 rating Hold), follows from the data of MarketWatch. Another 17 analysts advise to buy securities (Buy and Overweight), five - to sell (Sell and Underweight).

The average target price of $102.16 implies the securities are up 5% compared to the closing level on Tuesday, April 28.

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