Starbucks returned to customer traffic growth for the first time in two years, signalling early progress in its turnaround while underscoring the cost pressures reshaping its earnings profile.
The coffee chain reported mixed quarterly results, with rising store visits lifting sales even as higher input costs and restructuring expenses weighed on profitability.
The update also marked Starbucks’ return to formal guidance after it withdrew forecasts in October 2024.
Investors welcomed the clearer visibility, pushing shares more than 8% higher in premarket trading, as attention shifted to how quickly stronger demand can translate into steadier margins.
Traffic returns after long pause
For the quarter ended Dec. 28, Starbucks posted revenue of $9.92 billion, beating expectations and reflecting its second straight quarter of positive same-store sales.
Global comparable sales rose 4%, ahead of estimates, driven by a 3% increase in transactions.
This was the first time in two years that customer traffic expanded, a key marker for the company after a prolonged slowdown.
The US business also recorded a 4% rise in same-store sales, supported by holiday demand and renewed focus on core menu items.
Seasonal drinks and merchandise played a role in drawing customers back into stores, helping reverse a trend of declining visits.
International markets added to the recovery. Outside the US, same-store sales climbed 5%, showing that momentum was not limited to North America.
Profit pressure persists
Despite the pickup in sales and traffic, earnings moved lower.
Net income attributable to Starbucks fell to $293.3 million, or 26 cents per share, from $780.8 million, or 69 cents per share, a year earlier.
On an adjusted basis, earnings were 56 cents per share, below expectations.
Management flagged higher coffee prices, tariffs, and costs tied to the turnaround as key drags on margins during the quarter.
Restructuring expenses and impairment charges also weighed on reported results, highlighting the near-term trade-off between investing in recovery efforts and protecting profitability.
Net sales increased 6% year on year, but the margin impact shows how sensitive earnings remain to cost pressures even as demand improves.
China’s strategy in focus
China delivered one of the strongest performances in the quarter, with same-store sales rising 7% in Starbucks’ second-largest market.
The company used the period to outline changes to its operating structure in the region, announcing plans to form a joint venture with Boyu Capital to run its China business.
The deal is expected to close in the second quarter of fiscal 2026, subject to regulatory approval.
Starbucks said its fiscal 2026 assumptions include continuing to operate China’s retail stores through the second half of the year, providing continuity during the transition.
China remains central to Starbucks’ longer-term growth ambitions, even as competition intensifies and consumer behaviour evolves.
Store network reset
Starbucks continued to adjust its global store footprint. The company opened 128 net new locations during the quarter, adding to its presence while remaining selective about expansion.
For fiscal 2026, Starbucks plans to open between 600 and 650 net new company-owned and licensed cafes worldwide.
This follows the closure of roughly 400 US locations last year, part of a broader effort to streamline operations and exit underperforming sites.
The combination of targeted openings and closures reflects a shift toward quality of locations rather than rapid footprint growth.
Guidance returns, attention turns to investor day
Alongside the results, Starbucks reinstated financial guidance. For fiscal 2026, it expects adjusted earnings per share of $2.15 to $2.40, slightly below Wall Street estimates tracked by LSEG.
It is forecasting global and US same-store sales growth of at least 3%.
Investors are set to hear more about the pace and shape of the turnaround at an investor day in New York City, where executives are expected to outline updated long-term financial targets.
With traffic growth back on the table, the focus is now on whether Starbucks can sustain momentum while easing the earnings pressure created by its reset.
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