Shares in Starbucks (SBUX) surged after the coffee roaster and retailer served up a second straight quarter of traffic growth.
In a sign that CEO Brian Niccol’s turnaround strategy is working, the Seattle-based giant also upgraded its FY26 sales growth and earnings per share guidance.
Guidance raised
For FY26, Starbucks now expects global and US comparable store sales growth of 5% or greater. That is up from management’s prior forecast of an increase of 3% or more.
The coffeehouse colossus also raised its guidance for adjusted earnings per share to a range of $2.25 to $2.45. That is up from the previously guided $2.15 to $2.40.
| Share price: $104.8 (+7.7%) | Market cap: $118bn |
| Dividend yield: 2.4% | Exchange: Nasdaq |
Results for the second quarter to 29 March beat on both the top and bottom lines. Net sales frothed up 9% to $9.53 billion, topping the $9.16 billion Wall Street expected. And adjusted EPS of 50 cents exceeded the 43 cents analysts were calling for.
Global comparable store sales, which only includes cafes open for at least a year, increased 6.2%, driven by more visits to Starbucks’ locations. That growth rate beat the 3.7% consensus estimate.
Turnaround takes hold
US comparable store sales rose 7.1%, driven by a 4.3% uptick in transactions. This marked the second straight quarter of traffic growth for Starbucks in the coffee shop chain’s biggest market.
While the turnaround at Starbucks is clearly taking hold on its home turf, China remains a trouble spot. The company’s second-largest market dragged on results with a meagre 0.5% same-store sales increase.
Back to Starbucks
‘Our second quarter marked the turn in our turnaround as our Back to Starbucks plan drove both top and bottom line growth,’ commented Niccol.
‘This is the Starbucks we believe will deliver long-term growth and value for our partners and shareholders as we execute consistently, at scale.’
Cathy Smith, chief financial officer, added: ‘We’ve been clear that top line improvement would come first, with earnings growth to follow. We have more work to do, but we’re pleased to see the combination of our comp growth and cost discipline starting to show up in margins.’
Starbucks’ shares have already rallied 25% in the past year. Nevertheless, we think they can go higher as Niccol’s refreshed growth strategy continues to deliver.
Under his leadership, Starbucks has been winning back customers. The company has improved its cafe operations, refreshed the menu and reintroduced seating to locations. The net result is customers are visiting Starbucks’ locations more frequently and spending more when they do.
Sharesify notes the tasty Q2 performance builds on an encouraging Q1 in which Starbucks posted its first same-store sales growth in the US in two years.
While the consumer is grappling with inflationary pressures, Niccol believes Starbucks’ customers view the brand as a ‘touch of luxury’ or ‘worth it for a little splurge’. As such, he is convinced they’ll keep returning to Starbucks for their daily caffeine hit.
Read the press release here: https://investor.starbucks.com/financials/quarterly-results-and-data/default.aspx
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