Starbucks sales and profits fell short of expectations. Why did the stock jump 5%?

Coffee chain Starbucks reported its sixth consecutive quarter of falling sales and its earnings per share were half of what they were a year ago. However, the company's shares were up 5% at the moment in extended trading in the US. Investors were encouraged by the words of CEO Brian Niccol that the process of business transformation is ahead of schedule. In addition, positive data came from China, where sales grew for the first time in a year and a half.

Starbucks' global comparable sales declined 2% in its fiscal third quarter ended June 29, 2025, according to reporting released July 29 after the close of the U.S. stock exchanges. The figure is counted on outlets operating for more than a year to exclude the effect of network expansion. The drop in comparable sales was steeper than analysts had anticipated: they had expected -1.3%, reported CNBC StreetAccount estimates. Part of that decline was offset by a 1% increase in the average check. Starbucks' comparable sales declined for the sixth consecutive quarter, CNBC noted.

Starbucks' comparable sales in North America decreased by the same 2%, but on the contrary, it was better than expected (-2.5% at StreetAccount). The average check increased by 2%.

Starbucks revenue added 4% year-over-year to $9.5 billion (Wall Street expected $9.31 billion, CNBC cited LSEG data ). Adjusted EPS was $0.5 - 46% less than it was a year ago. Analysts had forecast $0.65, reported Bloomberg.

The value of Starbucks shares in extended trading on July 29 rose at one point to $97.77, up 5.1% from the closing level of the main session that day. After that, the pace of growth slowed slightly to about 3.5-4%.

The stock ended down 0.76% - to $92.96 in Tuesday's main trading ahead of the earnings release. Starbucks shares have gained 1.87% since the start of 2025, lagging the main U.S. S&P 500 index, which added 8.3%.

Starbucks shares rose as the company said it was making progress on CEO Brian Niccol's plan to turn around the business and return to sales growth, according to Bloomberg.

"We've fixed a lot of things and done the hard work on tough challenges to build a strong foundation to work from, and based on my experience of [business] turnarounds, we're ahead of schedule," Niccol said, his words quoted in a statement from Starbucks. The head of the coffee chain promised that in 2026, it will "unleash a wave of innovation that will drive growth, improve customer service and enable everyone to get the best from Starbucks."

"We are making tangible progress on our Back to Starbucks strategy," added CFO Cathy Smith in a Bloomberg statement.

Investors also preferred to focus on the positive aspects of the reports, the agency said. For example - on the first growth in China since the end of 2023: comparable sales there added 2% on the back of a 6% increase in comparable transactions, although the amount of the average check decreased by 4%. Starbucks has been lowering prices in the Chinese market to compete more effectively with local players such as Luckin Coffee.

The company is looking "conservatively" at its fourth-quarter outlook, said Smith, who was quoted by CNBC. Starbucks' CFO noted the uncertainty in consumer sentiment, but said the company is anticipating expected innovations and expects the return of the spiced pumpkin latte, popular during the fall season.

Starbucks management's focus on expanding coffee shop staff and improving service has led to higher labor costs that could hinder revenue growth, Morningstar analyst Dan Su warned in a note quoted by Barron's. He believes Starbucks' investment will shrink margins and turn to "choppy" earnings in the coming quarters. Su predicts that sales will grow 3.5% this fiscal year, mostly driven by new locations, while comparable sales growth will be very subdued. Still, Starbucks shares received a three-star rating from Su - meaning a fair risk-adjusted return, and a target price of $87 (6.4% below the current price), Barron's noted.

According to Melius Research analyst Jacob Aiken-Philips, Starbucks lacks a menu update, Barron's writes. Aiken-Phillips advises to sell the company's securities (Sell rating), and its target price is $80.

Starbucks stock has a total of 38 recommendations from analysts and the most popular one is Hold: 18 Hold ratings, shows MarketWatch. Slightly fewer advise buying: 14 Buy ratings and two Overweight ("above market"). Another four believe the securities should be sold: one Underweight ("below market") and three Sell.

The company has faced competition from smaller chains and declining interest from inflation-hit customers: some of whom also disliked Starbucks' move away from the traditional coffee shop format in favor of quick-service, noted MarketWatch.

Analysts and investors were largely positive about Niccol's moves to transform Starbucks, but demanded more details on the timing and ultimate cost of the plan, Bloomberg writes. Niccol will take over Starbucks in September 2024. Before that, he worked at Mexican restaurant chain Chipotle, where he was also revamping the business after a series of food standards scandals.

Some analysts were concerned about the cost of Niccol's plans to turn around Starbucks. In addition, trade duties and coffee prices remain a factor of uncertainty, MarketWatch added.

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