Starbucks Shares Surge Despite Earnings Miss as Turnaround Push Gains Traction
U.S. Sales Drop for Sixth Straight Quarter
Starbucks reported a 2% drop in U.S. same-store sales for the second quarter of 2025 marking its sixth consecutive quarterly decline. While this matched the previous quarter’s dip, it was slightly better than Wall Street’s anticipated 2.5% drop. The decline was driven by a 4% fall in comparable transactions, outperforming the projected 4.5% drop.
Stock Surges Despite Lower EPS
Despite the underwhelming performance, Starbucks shares rose more than 4% in premarket trading Wednesday, signaling investor optimism. Adjusted earnings per share came in at $0.50, missing the $0.65 expected. However, revenue rose by 5% to $9.5 billion, beating the $9.3 billion forecast.
Global Sales and China Growth
Global same-store sales fell 2%, exceeding the 1.5% decline forecast by Bloomberg, and accelerating from a 1% dip the previous quarter. In contrast, same-store sales in China rose 2%, surpassing the 1.4% expected thanks to increased transactions and innovative drink offerings, even as average ticket sizes declined due to price cuts amid competition with Luckin Coffee.
Niccol: “We Are Ahead of Schedule”
CEO Brian Niccol, known for reviving Chipotle, said in the earnings release: “We fixed a lot and done the hard work on the hard things… we are ahead of schedule.” Since taking the helm last fall, Niccol has cut staff, tightened office requirements, and restructured incentives for executives to drive cost savings and operational improvements.
The “Green Apron” Operating Model
Starbucks is rolling out a new service model “Green Apron” aimed at streamlining U.S. store operations by mid-August. Backed by a $500 million labor investment, the model was piloted in 1,500 stores, showing improvements in transaction speed, service quality, and sales.
CFO Cathy Smith described it as “a foundational operating model” focused on consistent, repeatable customer experiences.
Back to Basics: Cozy Coffeehouses
Shifting focus from pickup to in-store experiences, Starbucks plans small-scale store renovations — about $150,000 per location to reintroduce seating and a cozy atmosphere. For new locations, the company will reduce build-out costs by 30% and debut a 32-seat, drive-through prototype in 2026.
Innovation with the Baristas
Starbucks is also refining its product innovation process. Future menu additions such as protein cold foam (15g protein, no added sugar), coconut water-based teas, and upgraded food options are being co-developed with baristas rather than in corporate labs. Niccol emphasized: “Those days are over… we’re going to build it with the field.”
While no formal full-year guidance was issued, Smith expressed optimism for 2026, highlighting the upcoming relaunch of the popular Pumpkin Spice Latte. However, she remained cautious about Q4, citing ongoing macroeconomic uncertainty.
