Starbucks, the coffee behemoth, can’t seem to brew up a consistent recovery as same-store sales slide for the sixth straight quarter.
According to the New York Post, for the third quarter ending June 29, the company posted a 3.8% revenue jump to $9.46 billion, beating Wall Street’s $9.31 billion forecast, but saw a 2% drop in overall same-store sales amid a broader turnaround effort.
Despite topping revenue expectations, the numbers reveal cracks in the foundation. North America, Starbucks’ biggest market, reported a 2% decline in comparable store sales. Meanwhile, China showed a flicker of hope with a 2% increase, up from flat growth last quarter.
Profits, however, took a bitter hit. Starbucks reported an adjusted profit of 50 cents per share, falling short of analysts’ 65 cents estimate, with an 11-cent drag partly tied to a lavish leadership meet in Las Vegas for over 14,000 North American managers and leaders.
That event, complete with a private Bruno Mars concert, didn’t come cheap. Add in higher spending on turnaround initiatives and extra labor hours, and the operating margin shrank by 650 basis points to 10.1% from last year.
Costs are piling up as the company doubles down on transformation. It’s clear Starbucks is betting big on reinvention, but investors might wonder if the price tag is worth it.
Enter Brian Niccol, who stepped into the CEO role in August with a mission to reclaim the brand’s soul. His “Back to Starbucks” initiative aims to simplify menus, introduce freshly baked goods, bring back handwritten cup messages, and speed up service.
Niccol isn’t stopping at menu tweaks. He plans to revamp at least 1,000 North American stores by the end of 2026, promising “greater texture, warmth and layered design” in store aesthetics while replacing thousands of removed seats. Innovative store formats are also on the horizon. A lower-cost “coffee house of the future” with 32 seats and a drive-thru is set for 2026, alongside a small-format store debuting soon in New York City.
Labor is another big focus. Niccol has committed to boosting staffing across all 10,000-plus US company-owned stores by summer’s end, with over half a billion dollars earmarked for additional labor hours in the next year.
In China, Starbucks is playing defense against fierce local competitors like Luckin Coffee and Cotti Coffee. Last month, it slashed prices on select iced drinks by an average of 5 yuan to woo increasingly budget-conscious consumers.
The company is also exploring strategic partnerships for its China operations, valued at up to $10 billion. With over 20 interested parties, Starbucks aims to retain a significant stake while navigating this critical market.
Investors showed cautious optimism, pushing Starbucks’ shares up 3.6% to $96.33 in extended trading on Tuesday. Niccol called the efforts “ahead of expectations” during the post-earnings call, signaling confidence in the road ahead.
Analysts remain mixed on the outlook. “The report came in less worse than expected, given some strength in China, but it remains a turnaround story,” noted Dave Wagner of Aptus Capital Advisors.
For wealth-builders eyeing Starbucks, this is a classic turnaround play—high risk, potential reward. Watch how Niccol’s investments in labor and store redesigns impact margins, and consider whether China’s growth can offset North American struggles before jumping in.