Starbucks CEO Brian Niccol ‘cracked the code’ as the brand’s revival gains ground

Starbucks’ quarterly results on Wednesday showed proof that CEO Brian Niccol’s brand revival is working, sending shares to their highest levels in almost a year. Revenue in the three months ended Dec. 28 totaled $9.92 billion, up 5.5% year over year and beating the consensus estimate of $9.67 billion, according to LSEG data. Adjusted earnings per share (EPS) came in at 56 cents, slightly below expectations of 59 cents, LSEG data showed. On an annual basis, adjusted EPS fell 19%. Comparable store sales, a key restaurant industry metric, rose 4%, well ahead of the FactSet consensus of 2.3% growth. Shares of Starbucks were up more than 3% at around 10:30 a.m. ET, trading at nearly $99 apiece. At its high of the day of $104.82, the stock was at levels last seen in early March 2025. SBUX 1Y mountain Starbucks’ stock performance over the past 12 months. Bottom line Our faith in Niccol is being rewarded. The turnaround artist who joined Starbucks in September 2024 after a brilliant tenure at Chipotle pledged to return the coffee chain to its former glory. The numbers reported Wednesday morning demonstrate he’s doing just that. “Brian Niccol has cracked the code,” Jim Cramer said. The key metric is comparable store sales — often called comps or same-store sales — to measure the performance of locations open for at least 13 months. It’s the holy grail in restaurants. And here, Starbucks crushed the estimates. While we liked the global comps up 4%, the U.S. performance particularly stands out because the home market has been the focus of Niccol’s efforts. U.S. comps increased a better-than-expected 4%, driven by a 1% increase in average ticket and 3% increase in comparable transactions. It’s the first time in 2 years that Starbucks has seen an increase in comparable transactions. In other words, more people are ordering their Starbucks again, both rewards program members — now at a record 35.5 million people — and non-rewards members. On the earnings call, Niccol said this was the first time since the second quarter of Starbucks’ fiscal 2022 that transactions grew in both customer groups. Starbucks’ business with those occasional, non-rewards customers was in bad shape when Niccol took over. But these results suggest Niccol’s retooled marketing approach is resonating. When you include results from Canada, which are reported as the broader North America segment, the same sentiment holds (as seen in the chart below). In China, its second-most-important market after the U.S., Starbucks delivered impressive same-store sales growth of 7% when the Street was looking for only 2.45%, according to FactSet. Transactions in China were up 5%, with the average ticket up 2%. In the post-Covid period, China had been a really troublesome market for Starbucks, due in large part to cheaper local competition. Now, it’s clear the business is in a healthier place as it prepares to launch a joint venture with a private equity partner Boyu to operate it going forward. As we’ve said before, we liked Starbucks’ move because it allows management to increase its focus on improving its U.S. operations. The company can also use the cash proceeds from the transaction to pay down debt and reinvest more in stores. Starbucks still has work to do on profitability. Adjusted EPS missed, companywide adjusted operating income fell 11% year over year, and its 2026 full-year earnings guidance was a bit light. The company expects adjusted EPS to be $2.15 to $2.40, which, at the midpoint of $2.275, falls short of the FactSet consensus estimate of $2.35. However, that’s understandable at this stage of the turnaround, particularly on the outlook since we’re still early in Starbucks’ fiscal year and there’s no reason to be too aggressive. Niccol has been adamant that he needs to invest in the business by improving barista staffing levels and remodeling stores to make them inviting places again to grow sales. Those investments aren’t cheap. However, Niccol has argued that once topline momentum is restored, Starbucks will shift its focus to improving profitability. Based on Wednesday’s results, Niccol’s argument remains sound. We hope to hear more details on that next leg of the transformation journey on Thursday when Starbucks holds its first investor day under Niccol and provides longer-term guidance. We expect we’ll hear multiyear financial targets and get a better understanding of where Niccol expects margins to go from here. We mentioned before that Starbucks shares are higher but off their best levels of the session. That action demonstrates enthusiasm in the turnaround, tempered by some restraint around where the multiyear targets ultimately land. We’re confident Niccol has the correct plan in place, but we are also waiting to hear more at Thursday’s event. We are reiterating our 2 rating, but plan to reevaluate this and our price target after we digest the investor day highlights. (Jim Cramer’s Charitable Trust is long SBUX. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has discussed a stock on CNBC, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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