Starbucks (SBUX) will report its first earnings of the year tomorrow, and analysts are keeping a close eye on key indicators that could signal whether the company is on track for a turnaround in 2025.
Bank of America (BAC) analyst Sara Senatore is closely monitoring U.S. performance, reasoning that if the “U.S. business starts working again, it would be hard to argue that the Starbucks brand is fundamentally weak.” Wall Street expects a slight improvement in U.S. same-store sales, forecasting a 4% decline compared to larger 6% drop in the previous quarter.
Still, analysts remain cautious. Citi’s (C) Jon Tower said in a research note that while “there’s potential for a brand rebound,” the slow pace in same-store sales, store count, and earnings “may turn off some investors.” Over the past year, Starbucks’ stock has risen just 5%, lagging far behind the S&P 500’s 24% gain. However, shares have surged 32% in the past six months since Brian Niccol became CEO in Aug. 2024, signaling the company is “setting the table” for a recovery.
Sharon Zackfia, an analyst at William Blair, emphasized the importance of focusing on the bigger picture rather than short-term numbers. “Given investments to reset the business, and no fundamental underlying improvements in trends as of yet, we’re maintaining our below-consensus full-year adjusted EPS estimate of $3.04, reflecting an 8% decline.” Zackfia noted, however, there’s potential for a turnaround, though Starbucks has yet to show consistent improvements.
Looking ahead, the long-term outlook is more optimistic. Zackfia sees a return to sustainable double-digit earnings per share (EPS) growth by fiscal 2026, with projected EPS of $3.41 – up 12% from prior estimates.
While short-term challenges remain, Niccol’s strategy is focused on getting Starbucks back on track, and returning the company to its roots. His plan includes creating a more premium coffeehouse experience, reintroducing condiment bars, hand-written names on cups, and speeding up coffee preparation. These shifts, combined with steady pricing strategies and new menu items, are designed to improve customer engagement, and ultimately, drive sales.
As Starbucks continues to reset its U.S. operations, tomorrow’s earnings report will shed light on how the company’s long-term goals are progressing – and whether they’ll be enough to get the coffee giant back on top. Earlier this month, the company announced a “Coffeehouse Code of Conduct,” limiting access to its bathrooms to paying customers only.
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