Earnings Beat Raises the Bar
Starbucks just served up a quarter that made investors want another cup.
The coffee giant reported adjusted earnings per share of 85 cents for its fiscal third quarter ended June 28. That blew past the 66 cents analysts were looking for, according to a survey of analysts by LSEG. Starbucks reported net income of $1.05 billion (91 cents per share), compared with $558.3 million (49 cents per share) in the same quarter last year.
Revenue also came in higher than expected at $9.32 billion, just above the $9.16 billion analysts had predicted.
The company didn't stop there. It also boosted its forecast for global same-store sales growth to nearly 6% for fiscal 2026, up from at least 5%. And U.S. same-store sales are now expected to grow by more than 6%, also raised from at least 5%.
Shares surged by up to 9% during after-hours trading following the announcement.
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What's Driving the Turnaround
Starbucks has been rolling out a plan it calls "Back to Starbucks," and the numbers suggest it is working.
Starbucks concentrated on enhancing customer service and creating a more inviting atmosphere in its U.S. locations. Those changes helped drive North American same-store sales up 8.1% in the quarter. Customer traffic in North America rose 4.5%, and the average amount spent per visit climbed 3.5%. Outside North America, same-store sales grew 5.7%.
Store renovations have been a big part of the push. In the quarter, the chain added 175 net new locations and completed over 1,000 cafe renovations, hitting its fiscal 2026 target early. The company aims to renovate no fewer than 1,500 stores by the close of fiscal 2026. Each renovation costs roughly $150,000 on average, and CEO Brian Niccol said they result in higher transactions.
Tariff refunds also helped. CFO Cathy Smith noted that tariff refunds received in Q3 mostly compensated for the tariffs paid during the first three quarters of fiscal 2026. That helped boost the operating margin to 13.6%, up from 13.3% a year earlier. The company declined to disclose the precise amount of those refunds.
What This Means for Your Portfolio
The strong quarter is not just a blip. Starbucks raised its guidance because it believes the trends will hold.
But there are a few things to watch. The company's North American store count shrank by 1% in fiscal 2025 because of closures. Additionally, Smith stated that Starbucks is reviewing its store portfolio in North America, potentially leading to additional closures.
On the plus side, Niccol also mentioned that Starbucks plans to trial "spritzers," which are carbonated versions of its Refreshers, in chosen locations. The Refreshers line has expanded into a $2 billion beverage category and frequently attracts visitors to Starbucks stores in the afternoon.
The bottom line: A company that can beat expectations and raise its outlook is usually a good sign for shareholders. The stock's after-hours jump tells you the market agrees. Still, store closures are real risks worth keeping an eye on.
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