Starbucks (SBUX) reported its first year-over-year earnings growth in over two years, sending shares up approximately 8% in trading on Wednesday. The coffee giant posted fiscal Q2 revenue of $9.5 billion, a 9% increase year-over-year, surpassing analyst estimates of $9.17 billion. Adjusted earnings per share came in at $0.50, beating the $0.43 consensus estimate and marking a 22% jump from the prior year.
The strong results were driven by a notable recovery in customer traffic. U.S. transactions grew roughly 4% year-over-year, the first such increase in three years, while global comparable sales rose 6.2%. In the United States, comparable sales increased 7.1%, the strongest quarterly result since Q4 2023. CEO Brian Niccol described the quarter as "a milestone for Starbucks and the turn in our turnaround."
Starbucks also raised its full-year outlook, now expecting comparable store sales growth of approximately 5% and full-year adjusted EPS of $2.25 to $2.45, up from the prior guidance of $2.15 to $2.35. The company's "Back to Starbucks" strategy, which includes menu simplification, faster service, improved in-store experience, and a revamped loyalty program, has shown early traction. Niccol noted that growth came across all income groups and that delivery grew more than 30% year-to-date.
Despite the positive sales trends, profitability remains under pressure. North American operating margins declined to 9.9% from 11.6% a year earlier due to higher labor investments and costs associated with the turnaround. UBS analysts noted that margins are an area of focus, though operational improvements could provide support over time.
Wall Street consensus on SBUX is a Moderate Buy, with an average price target of $106.29. Shares have gained about 25.2% year-to-date, and the stock is trading at a forward price-to-earnings ratio of roughly 36.
