Starbucks’ CEO Scored in His First Year. Now Comes the Hard Part.

Starbucks CEO Brian Niccol (Michael Reaves/Getty Images)

Brian Niccol has led Starbucks for almost a year, and it has been a bumpy ride to revamp the coffee chain’s brand. Wall Street thinks the path for the rest of this year for his “Back to Starbucks ” plan will be anything but straight.

After Starbucks reported mixed third-quarter results —which beat revenue expectations but missed on earnings per share—investor patience could wear thin if the coffee giant continues to see weak results. Shares are up about 2% this year and have tumbled about 20% from their 52-week high in late February.

Same-store sales in North America, a key metric for investors, continue to show weakness, dipping 2% in the third quarter year over year due to a 4% slip in comparable transactions.

Starbucks’ brand appeal took a hit after the focus on drive-through operations and mobile ordering overwhelmed baristas, slowed down service, and led to a deteriorating in-store experience. Expensive prices and uncertainty surrounding union negotiations have also plagued Starbucks’ image.

“It’s like breaking up with someone you’ve been dating,” Stephen Zagor, adjunct professor of nutrition and food studies at NYU Steinhardt, told Barron’s. “Suddenly, Starbucks wasn’t there for you and their prices were too high. Their service was variable. It took too long, and that brand loyalty disappeared somewhat.”

In a July 29 earnings call, Niccol said the turnaround plan is “ahead of schedule.” Since he became CEO last September, there are signs of success, with the in-store customer experience remaining a priority. More customers are hanging out in the cafes as locations have been remodeled to include plush couches, quiet corners and warmer lighting, according to Starbucks.

Niccol’s focus on personalized customer experience—with baristas hand-writing names on cups and bringing back the condiment bar—appears to have boosted transactions: in the third quarter, non-rewards customers “delivered transaction growth” year over year for the first time since the post pandemic recovery, the company said.

The market has tolerated margin losses for the turnaround plan, but investors don’t have “infinite patience,” said John Zolidis, president and founder of equity research firm Quo Vadis Capital. While Wall Street analysts anticipate North America’s same-store sales to edge up 0.3% in the next quarter, they expect U.S. comparable sales to drop 1%.

Margin recovery will be the metric to watch. On the earnings call, Niccol suggested that 2019’s operating margin, which was 17%, is a “guidepost.” For the fiscal year, Starbucks is on track to achieve a 10.5% operating margin, according to analyst estimates.

Zolidis said that while long-term investors could be hopeful about margin recovery, it’s difficult to be too optimistic. “There’s an enormous gulf in profitability between where the business is today and where they think they could potentially return to one day,” he told Barron’s. “The stock is likely going to tread water at best until there’s more evidence of improving metrics.”

Starbucks plans to roll out a “wave of innovation” in 2026, including new menu items in the fourth quarter featuring a 15-gram protein cold foam, coconut water-based tea and gluten-free baked goods. Starbucks will cut about 30% of its menu by the end of this year to streamline operations, reduce wait times, and add the new menu items.

For the 2025 fiscal year, analysts forecast earnings per share of $2.21, down about 33% from fiscal year 2024. Starbucks’ 2026 fiscal first quarter, ending Dec. 29, could show potential improvement in sales, and provide feedback on new products, said Evercore analyst David Palmer. He has an Outperform rating with a target price of $105, which would be about a 13% gain from Thursday’s closing price of $93.04.

Starbucks still faces the union issue. While the company didn’t address updates with the union or its financial impact on the earnings call, some analysts said it could surface as a long-term problem. Starbucks and the union representing more than 11,000 workers still don’t have a contract.

In the earnings call, Starbucks said both job satisfaction rates and the number of completed scheduled shifts—based on feedback from an employee survey—rose in the third quarter.

The union comprises about 5% of its workforce and is “not representative” of the majority of their employees, a company spokesperson told Barron’s.

The market reacted positively when Niccol was named CEO because of his previous experience at turning around Chipotle Mexican Grill. He revived the chain, which was facing food safety concerns in 2015. Many investors hope Niccol can produce the same results at Starbucks.

Some rivals are looking to grab market share. Dutch Bros has grown rapidly by offering drinks with endless flavor options at drive-through lanes. Workers known as “bro-istas”—a play on the word barista—cheerfully chat with customers. Shares have climbed nearly 29% this year.

“People talk about Dutch Bros servers, the ‘bro-istas’, as if they were grown in a lab—they’re so good at what they do,” Robert Byrne, director of consumer and industry insights at Technomic, told Barron’s. “It’s a huge part of their competitive advantage—not just against other beverage players—but against quick service as a whole.”

Starbucks, however, has a geographic advantage: it operates more than 41,000 stores globally. China, with 7,700 locations, is its largest non-U.S. market, and Starbucks is still navigating the competition there. Luckin Coffee, a popular Chinese coffee brand, has lower prices and a menu with fruit-flavored cold brews and trendy names like ‘Velvet Latte.’ Luckin recently opened its first two U.S. stores in Manhattan near Starbucks stores. Starbucks reported a 2% increase in comparable-store sales in China in the third quarter.

Starbucks has long positioned itself as a premium coffee brand by attracting all kinds of customers—even those outside the 34 million members of its rewards program—through Instagram marketing campaigns and seasonal offerings, like the pumpkin spice and winter holiday drinks.

But some consumers have cut back amid food inflation. Although coffee is still a popular drink, Starbucks is often seen as a treat. The company said it won’t raise prices this fiscal year. “Starbucks is leaning into a breeze of trying to do a turnaround into a tougher environment for its consumer,” said Palmer. “And you can feel it.”

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