Starbucks Corp (NASDAQ: SBUX) earnings release last night hardly had anything particularly fancy in there. Revenue was down 0.3% on a much larger 23% hit to adjusted per-share earnings in Q1.
Nonetheless, a deeper dive into the company’s report suggests Brian Niccol, its new chief executive brought in from Chipotle, is on the right track to deliver a successful turnaround.
For example, the world’s largest coffee chain saw its sales improve sequentially in the first quarter as Niccol continued to reinvest in what sets Starbucks apart from the competition – a premium experience.
SBUX is keeping flat this morning following a better-than-feared quarterly release that may be an opportunity for investors interested in the fast casual restaurant chain for the long term.
Niccol is taking baby steps to breathe new life into Starbucks
Starbucks reintroduced ceramic mugs and brought back condiment bars in the United States to offer a more upscale experience in the first quarter.
Meanwhile, its CEO Brian Niccol is laser-focused on securing strategic partnerships to improve sales in China.
Additionally, he’s identified several changes that could help stabilise the regional operations as well.
Starbucks already saw its net revenue pop 1.0% on a year-over-year basis in China in what was the company’s first quarter under Niccol’s leadership.
That should bring more confidence to investors that his “Back to Starbucks” strategy is advancing well and has the potential to unlock significant upside in the company’s stock price as we move through the rest of 2025.
Niccol says Starbucks remains resilient as a brand
Starbucks improved its QSR share in the United States that Niccol cited as a win on the Q1 earnings call.
These things tell us our actions are resonating with customers, the Starbucks brand is still resilient, and we have significant future potential.
He remains convinced that fixing the mobile ordering system, including a better algorithm to prioritise orders could result in significant throughput gains in the coming quarters.
To that end, Starbucks announced plans of reducing its stock-keeping units (food and beverage) by some 30% by the end of this year.
Finally, a 2.3% dividend yield also makes SBUX more attractive to own at writing.
Should you invest in SBUX following Q1 earnings
Starbucks left its guidance suspended last night – but said earnings were now seen improving in the back half of 2025, reiterating that better days were coming soon.
The coffee chain noted an increase in its membership as well as non-membership customers in the first quarter, further indicating that Niccol is the right leader to bring SBUX back to growth.
There’s hardly a quick fix for all that’s went wrong at Starbucks in recent years, though.
So, investors may need to remain patient, but there sure are early signs that their loyalty may be rewarded well over the long term.
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