Starbucks’ sales improve in a 'milestone' quarter

Customers apparently like better service.

That is the apparent lesson from Starbucks’ fiscal second quarter earnings, in which the Seattle-based coffee-shop giant announced its best sales results—and first earnings growth—in more than two years, amid service improvements inside the shops.

Same-store sales in the U.S. rose 7.1% in the quarter ended March 29, the highest since the fall quarter of 2023. Transactions rose 4.3% in the period, meaning customers came in more often and typically spent more when they did.

Globally, same-store sales increased 6.2%. The company said that all 10 of its largest international markets generated positive same-store sales for the first time in nine quarters.

In the process, the company also reported earnings improvement. The company said that earnings-per-share increased 32% to 45 cents.

“This quarter marked a milestone for Starbucks and a turn in our turnaround,” Brian Niccol, Starbucks CEO, said in a video message on Monday. “Put simply, more customers are getting back to Starbucks as we deliver the best of Starbucks more consistently.”

“We’ve made tremendous progress over the last 18 months,” Niccol added on the company’s earnings call Tuesday.

Starbucks raised its expectations for same-store sales for the year to 5% or better in the U.S. and globally. It also raised its expectations for earnings, arguing that that the company should get the benefit from sales leverage and cost discipline, while prices for coffee are expected to ease. It also said that the sale of its China market should also improve profits.

Starbucks has spent much of the past year and a half overhauling management and the way it operates inside its coffee shops, including some closures. That includes a new “green apron” service model that allowed managers to add workers during key hours, which has helped improve speed and service, driving more transactions.

Starbucks also made investments in scheduling, technology and store leadership. The company’s Smart Queue in its mobile app has helped ease backups, and the chain is about to introduce scheduled ordering on the app that should also help. “Our partners are showing up with confidence and they’re delivering great craft and connection with speed, even as more customers come back to visit,” Niccol said.

Innovation also helped. Cold foam sales grew 40% last quarter, thanks to soaring demand from younger consumers and the company’s Protein Foam.

Yet investors will be watching the company’s profitability closely. Starbucks has been investing heavily in its business, focusing on top-line sales.

“We’ve been clear that top-line improvement would come first, with earnings growth to follow,” CFO Cathy Smith told analysts on Tuesday. That earnings growth came in, finally, last quarter.