Starbucks Sales Still Show Weakness. Same-Store sales Dip 2%.

Net sales at Starbucks grew 4% from a year ago, mostly driven by the coffee chain’s expanded footprint. (Spencer Platt/Getty Images)

That cup of joe at Starbucks might be getting a tad bitter. Starbucks reported third-quarter results that beat Wall Street’s expectations on revenue but missed on earnings per share.

Investors are taking the news with mixed feelings. Shares tumbled nearly 4% after Tuesday’s market close, but quickly rose to a nearly 5% gain.

For the three months ended on June 29, the Seattle-based cafe chain reported adjusted earnings per share of 50 cents on $9.5 billion in revenue. Analysts surveyed by FactSet expected Starbucks to report adjusted earnings per share of 64 cents on revenue of $9.29 billion. In the year-ago third quarter, the coffee giant posted adjusted earnings per share of 93 cents on revenue of $9.11 billion.

Net sales grew 4% from a year ago, mostly driven by the coffee chain’s expanded footprint. In the third quarter, Starbucks opened 308 net new stores, boosting the total to 41,097.

But comparable sales at existing stores continued to show weakness. Global same-store sales dipped 2% year over year, more than analyst estimates for a 1.3% decline. In the U.S., comparable-store sales dropped 2% year over year due to a 4% slip in transactions.

Starbucks has been hurt as of late by lower foot traffic and pricing-power issues. The company, under CEO Brian Niccol, is making an effort to turn things around through the so-called “Back to Starbucks” plan.

“While the financial results don’t yet reflect all the progress we’ve made, the signs are clear—we’re gaining momentum,” said Niccol in a video message to investors.

He said in an earnings statement that “we’ve fixed a lot and done the hard work on the hard things to build a strong operating foundation, and based on my experience of turnarounds, we are ahead of schedule.”

He also said the company plans to “unleash a wave of innovation” in 2026. In an earnings conference call, he said Starbucks is revamping its rewards program, which “became too much of a one size fits all and a discounting mechanism, as opposed to a program that really recognizes people for their loyalty and builds more engagement.”

Niccol also said the company will roll out new menu items next quarter, including a 15-gram protein cold foam, coconut water-based tea and customizable energy drink offerings. Starbucks will also experiment with gluten free products and nutritional goods, following customer feedback for more healthy products.

While the third-quarter earnings are only half as much as a year ago, Starbucks noted it’s partly due to some one-time costs incurred during the quarter such as the Leadership Experience 2025—a conference in June where Starbucks hosted over 14,000 coffeehouse leaders from across North America—and some discrete tax expenses. CFO Cathy Smith said these items have negatively impacted third-quarter earnings by 11 cents.

Shares of the coffee giant, trading at $92.96 at Tuesday’s close, are largely flat this year, while the S&P 500 index has risen 8.6%.

Management’s focus on higher store staffing and improved hospitality has led to higher labor costs, which could dampen revenue growth, Morningstar analyst Dan Su wrote in a report. He has an $87 price target on shares and rates them at three stars, meaning “a fair risk-adjusted return.”

Su expects increased investment will squeeze margins and “drive choppy profits in the coming quarters.” Last quarter, operating margins dropped 590 basis points year over year to 6.9%. He anticipates sales will grow 3.5% this fiscal year, mostly driven by net new stores as he predicts muted growth in same-store sales. Wall Street analysts project a 1.3% year over decline in same-store sales for the third quarter, according to FactSet.

Starbucks also lacks menu innovation, one observer says. The new beverages introduced in the summer lineup—including the Iced Horchata Oatmilk Shaken Espresso—aren’t enough for customers, Melius Research analyst Jacob Aiken-Phillips says in an interview. He rates Starbucks stock at Sell with a price target of $80.

This January, Starbucks said it would reduce the in-store menu by 30% by the end of this fiscal year as a way to increase in-store service. Investors, Aiken-Phillips thinks, seem to be more excited about McDonald’s , which recently reintroduced its Snack Wrap, than Starbucks.

To lure customers back into stores, Starbucks has been remodeling some locations and adding comfortable seating to make them more inviting. CEO Brian Niccol, who has pushed for amplifying Starbucks’ reputation as a vibrant community gathering space, has also asked baristas to write notes on cups, and serve drinks in ceramic mugs.

This strategy, however, could take way longer than people expect, says Aiken-Phillips. “It could take years to get their entire system to fix that valuation gap,” he told Barron’s. “They could obviously cut prices in half and everyone would come back—they would significantly increase traffic—but that would destroy their EPS.”

Across the ocean, competition in China doesn’t appear to be slowing down. The rising growth of Luckin Coffee —China’s largest coffee chain—has crimped Starbucks’ sales in the country. Starbucks, which has more than 7,700 locations in China, recently lowered prices on non-coffee beverages there; same-store sales fell 8% in the fiscal second quarter from a year ago.

Incidentally, in late June, Luckin opened its first U.S. stores in Manhattan near Starbucks locations.

In the fiscal second quarter, Starbucks earned 41 cents per share on revenue of $8.8 billion, while analysts had expected earnings per share of 49 cents on revenue of $8.8 billion. While revenue increased 3% from a year ago, much of that was attributable to new store openings. Same-store sales for existing locations declined 1% from the year-ago quarter with transactions falling 4% in North America. Earnings were down 40% from a year ago.

Investors will be focused on guidance in the face of the potential impact of a 50% tariff on Brazilian goods. Starbucks’ North America annual costs of goods sold could increase by 0.5%, and impose a 0.8% drag to its adjusted earnings before interest, taxes, depreciation, and amortization, TD Cohen analyst Andrew Charles wrote in a report. Charles rates Starbucks stock at Hold with a price target of $90. Starbucks has said, however, it will not raise prices through the end of fiscal 2025.

That Starbucks could rebound remains to be seen. Investors have been looking for signs of traction ever since 2022, and some stakeholders might be falling victim to a “reinvention fatigue,” says Aiken-Phillips.

“It’s either going to take a bigger earnings reset or it’s going to take significantly longer for them to get back to the stable global growth that has made the stock so well-liked,” he said*.*

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