Starbucks (NASDAQ: SBUX) shares climbed approximately 6% in premarket trading Thursday after the company reported stronger-than-expected fiscal third-quarter earnings and raised its full-year guidance, signaling that CEO Brian Niccol's turnaround strategy is gaining momentum.
The coffee giant posted global comparable sales growth of 7.9% for the quarter, surpassing the 5.7% consensus estimate from analysts surveyed by Bloomberg. This marks the fourth consecutive quarter of same-store sales increases and a notable improvement from the 6.2% growth recorded in the prior period. The performance also represents a sharp reversal from the same quarter last year, when comparable sales declined 2%.
Adjusted earnings per share came in at $0.85, well above the $0.66 analysts had forecast. Revenue reached $9.3 billion, exceeding the $9.2 billion consensus estimate. The stronger results were driven by higher customer traffic and increased spending per visit, as patrons customized drinks and added food items to their orders.
For the full fiscal year, Starbucks now expects adjusted EPS in the range of $2.55 to $2.65, up from its previous guidance of $2.25 to $2.45. The company also raised its comparable sales outlook, now forecasting global and U.S. same-store sales growth of nearly 6%, compared with its earlier projection of at least 5%.
"This was the quarter our momentum became truly measurable," Niccol said in a video accompanying the earnings release. "It's clear proof that our Back to Starbucks plan is working," he added during the earnings call.
North American comparable sales rose 8.1% in the quarter, supported by a 4.5% increase in transactions and a 3.5% gain in average ticket size. Internationally, comparable sales grew 5.7%, with roughly 90% of overseas stores now operating under licensed arrangements following the formation of a China joint venture. This asset-light model typically appeals to investors due to lower capital requirements and stronger long-term profitability.
Starbucks opened 175 net new stores during the quarter and completed more than 1,000 café renovations, achieving its fiscal 2026 target ahead of schedule. Management now plans to complete at least 1,500 store upgrades by the end of fiscal 2026 while accelerating additional renovations next year.
Menu innovation also contributed to the sales momentum. The company has removed slower-selling items and introduced new beverages, including plans to test sparkling versions of its Refreshers, branded as "spritzers," in select markets. Refreshers, which generate approximately $2 billion in annual sales, saw double-digit revenue growth in the quarter, helping drive afternoon traffic beyond the traditional morning coffee rush.
Consumer Edge analyst Michael Gunther noted that Starbucks is beginning to regain market share, particularly among younger consumers. "Starbucks has begun to experience market share stabilization in recent months, most notably with younger diners," Gunther said. He added that while consumers remain cautious about discretionary spending, many continue to prioritize affordable daily indulgences.
The strong quarterly performance prompted several Wall Street firms to raise their price targets on Starbucks shares. Morgan Stanley increased its target to $115 from $111 while maintaining an Overweight rating, citing both temporary and structural drivers behind the improving sales. The stock currently trades at $104. RBC Capital Markets and Jefferies also lifted their targets.
Morgan Stanley noted that factors such as store closures, sales transfers, and delivery contributed to quarterly growth, but said longer-term catalysts including renovated stores, product innovation, and stronger afternoon demand should continue supporting sales into next year. The brokerage also said the Green Apron Service initiative will begin to cycle through comparisons next quarter, providing investors with a clearer picture of margin recovery.
For more on central bank policy, see our coverage of the Bank of England's latest rate decision. Meanwhile, investors are also watching divergent tech earnings as a barometer for broader market trends.
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