Starbucks Faces Setbacks but Sees Glimmers of Progress in Turnaround Effort

Starbucks has reported another disappointing financial quarter, with earnings and revenue falling short of analysts’ expectations. The coffee chain’s same-store sales declined for the fifth consecutive quarter, as demand weakened in its two largest markets—the U.S. and China. Despite these setbacks, CEO Brian Niccol expressed confidence in the early progress of the company’s “Back to Starbucks” turnaround strategy, emphasizing improvements in store operations and customer service experience.

The company’s net income dropped sharply year-over-year to $384.2 million, or 34 cents per share, from $772.4 million, or 68 cents per share. After adjusting for restructuring costs, Starbucks earned 41 cents per share—still below Wall Street’s projected 49 cents. Revenue reached $8.76 billion, missing the expected $8.82 billion. The company’s operating margin also shrank to 6.9% from 12.8% as investments in labor and promotional efforts pushed costs higher.

Starbucks has shifted focus from automation to human resources, pausing the rollout of equipment such as its Cold Pressed Cold Brew system and food-heating machines. Instead, it’s hiring more baristas to improve service and reduce wait times. Niccol explained that this labor-intensive approach is aimed at fostering better customer connections and reducing future equipment costs. Outside the U.S., the company spent more on promotions to increase foot traffic and absorbed restructuring expenses linked to streamlining its global operations.

Adding to its internal restructuring efforts, Starbucks is dealing with external pressures such as trade tensions and volatile coffee prices. Tariffs introduced by former President Donald Trump are expected to impact green coffee beans, which make up 10–15% of the company’s production and distribution costs. In a regulatory filing, Starbucks acknowledged that the remainder of the fiscal year may bring further macroeconomic challenges, and said it is actively working to limit the financial fallout.

Customer behavior continues to shift as economic uncertainty drives consumers in key markets to seek more affordable coffee options. Starbucks’ global same-store sales declined 1% in the quarter, driven by a 2% drop in transactions. In the U.S., the situation was more severe, with a 4% decline in traffic leading to a 2% same-store sales drop. Meanwhile, China’s flat performance was due to lower average ticket sizes, despite an increase in transactions.

Looking ahead, Starbucks is planning several initiatives to attract customers and refine its operations. These include updating cafe interiors with more comfortable seating and premium finishes, as well as revamping the product innovation process. Additionally, the company is working to improve staffing, service standards, and operational algorithms to enhance both speed and accuracy in order fulfillment. While the financial results have yet to reflect these changes, leadership remains hopeful that their strategy is on the right track.