Starbucks shares rose more than 3% in extended trading on Tuesday, even though the coffee chain reported mixed quarterly results. Despite this, we heard enough positives to confirm that CEO Brian Niccol’s turnaround remains firmly on track. Revenue increased 3.8% year over year to $9.46 billion in the fiscal 2025 third quarter, beating the $9.31 billion expected by analysts, according to LSEG. Adjusted earnings per share (EPS) fell 46% year over year to 50 cents. Given one-time costs in the quarter primarily associated with a leadership conference in Las Vegas, it’s not clear if the reported EPS figure is comparable to the LSEG consensus estimate of 65 cents. SBUX YTD mountain Starbucks’ year-to-date stock performance. Bottom line When you analyze an earnings report of a company in the early stages of a turnaround, you must remember to grade it on a curve. The results will be uneven, especially in the quick service restaurant industry, because some stores are upgraded well before other locations. In that context, it’s no surprise that Starbucks delivered another messy quarter, but there were signs of stabilization with seven of its top 10 markets outside the United States delivered positive same-store sales growth, which is a good sign for the future because, right now, the bulk of Niccol’s revitalization efforts are focused domestically. Same-store sales — sometimes also called comparable store sales, or comps — is a critical metric in the restaurant industry. More importantly, Starbucks’ last three months were more about figuring out what changes to make to set it up for long-term success. Niccol described this dynamic perfectly on the earnings call when he said, “this quarter was really all about laying the operational foundation for Starbucks.” Starbucks appears to have found the right strategy to return to positive comparable sales growth through its “Green Apron Service” approach. This initiative, which is the largest investment in company history, focuses on investments in labor and technology to improve the customer experience and speed up service times. Starbucks (SBUX) Why we own it: Starbucks has one of the most recognizable brands of any restaurant. But over the last few years, operations have been challenged by store inefficiencies and a slow recovery in China. Under the leadership of turnaround artist Brian Niccol, we expect operations will improve and return to growth. Competitors: Dunkin, McDonald’s, Panera, Dutch Bros. Initiation date: Aug. 22, 2022 Portfolio weight: 2.53% Most recent buy: April 22, 2025 The Green Apron Service is eight weeks into its 1,500 store test program, the company said, and so far, the results have been highly encouraging. Coffee houses with the Green Apron Service are outperforming legacy stores in transactions, sales and customer wait times. Thanks to these results, Niccol and his team decided to accelerate its rollout and begin fully scaling it across all U.S. company-operated stores in…
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