Starbucks’ turnaround plan shows promise in US as sales growth returns for first time in 2 years
Demand is rebounding at Starbucks, signaling that CEO Brian Niccol's turnaround efforts are working.
The company said on Wednesday that sales at North American stores open for at least a year rose by 4%. This growth was mainly due to a 3% increase in purchases from existing customers and a 1% increase in the average amount spent per transaction. That's the first uptick in store sales in eight quarters.
Globally, sales at stores also rose 4% as existing customers bought more and spent slightly more per purchase.
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The global coffee chain, which overhauled its strategy and launched a turnaround plan under Niccol in September 2024, beat Wall Street expectations on sales and revenue, but it missed profit, known as earnings per share, estimates.
The company reported revenue of $9.9 billion in revenue and reinstated its full-year targets Wednesday. Starbucks stock is up $16.24 so far this year, which is a 19.34% increase.
The company will host its first investor day under Niccol on Thursday in New York, as he pushes the chain to return to its coffeehouse roots and encourage customers to stay rather than rush through.
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"Our Q1 results demonstrate our 'Back to Starbucks' strategy is working and we believe we're ahead of schedule," Niccol said in a statement. "It's great to see the sales momentum driven by more customers choosing Starbucks more often, and this is just the beginning."
Niccol has affirmed, even before its latest earnings, that the company was ahead in its turnaround plan.
In September, Niccol told FOX Business that the coffee chain was "ahead of schedule" in its turnaround, though he acknowledged that the work was far from over.
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Niccol is betting on an "aggressive" redesign, enhanced rewards program and an array of new food and beverage items to drive momentum and reverse the decline in traffic.
While it's not Niccol's first turnaround, as he helped Taco Bell and Chipotle weather their own storms, he became Starbucks’ third CEO in two years, inheriting a company that faced pressure from unionization campaigns across the nation and back-to-back disappointing fiscal quarters as traffic declined a year ago.
Starbucks stores in the U.S. have continued to see a decline in store visits during a time when broader environmental factors have caused consumers to be more mindful of where they spend money.
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But Niccol emphasized his confidence in the company’s trajectory, noting that several initiatives have been rolled out faster than he initially expected, including a new protein menu coming at the end of September and the Green Apron Service model. That service model leverages tools such as its Smart Queue to sequence orders across mobile pickup, drive-thru and café so they don’t compete with each other, effectively decreasing wait times for customers.