Starbucks Corporation has reported weaker-than-expected sales and profit for its fiscal third quarter, signaling that its ongoing turnaround efforts under new CEO Brian Niccol have yet to deliver immediate results.
Comparable sales dropped by 2%, exceeding the 1.5% decline projected by analysts surveyed by Bloomberg. Meanwhile, earnings per share, excluding certain items, came in at 50 cents, falling short of the 65-cent average estimate.
Starbucks CEO Brian Niccol, who assumed leadership in September, is spearheading a comprehensive plan to reinvigorate the brand. His strategy includes:
Reducing wait times
Upgrading store interiors
Revamping the food and drink menu
Bringing back the personal, cozy café experience
Niccol stated on Tuesday that the turnaround efforts are “ahead of schedule,” and he committed to unleashing “a wave of innovation in 2026.”
Despite enthusiasm for the reforms, investors remain cautious about the timeline and cost implications.
As part of the turnaround, Niccol revealed:
Starbucks is cutting store construction costs by 30%
The company is adding more staff to enhance service quality
There's a renewed focus on in-store and drive-thru orders
One of the most significant strategic changes is the company’s decision to discontinue its pickup-only store model in the next fiscal year.
“Those locations lacked the warmth of traditional stores,” Niccol noted.
Despite the overall sales dip, analysts observed positive signals in the U.S. market:
The sales slump was smaller than expected
Employee turnover and customer satisfaction have shown signs of improvement
“Transactions are improving,” said Chief Financial Officer Cathy Smith. “Just where they will net out is unclear.”
China, Starbucks’ second-largest market, recorded:
A 6% increase in transactions
A 2% rise in same-store sales
To attract customers, Starbucks cut prices on tea-based beverages and introduced more sugar-free options.
Furthermore, the company is reportedly exploring the sale of a stake in its China business, with more than 20 interested parties. However, Niccol emphasized that Starbucks wants to maintain a “meaningful” stake.
Operating margins for the quarter were impacted by:
Higher labor costs
Inflation
Expenditure on events, including a major Las Vegas conference to energize store managers
“The company will spend $500 million on more labor in U.S. company-operated stores over the next year,” Chief Financial Officer Cathy Smith confirmed.
She also warned that Starbucks remains “conservative” about the rest of the fiscal year, given the uncertainties tied to its turnaround plan and the broader consumer landscape.
While Starbucks’ Q3 performance fell below expectations, the company’s long-term strategy under Brian Niccol is beginning to show early signs of progress, especially in customer satisfaction, employee retention, and international market recovery.
The decision to move away from pickup-only formats, enhance store ambiance, and invest heavily in labor and innovation reflects a bold commitment to reclaiming Starbucks’ position as a global leader in premium coffee retail. However, the next few quarters will be critical in determining whether these ambitious reforms can translate into sustained growth and profitability.