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Starbucks Stock Gains 15% YTD: Can Its Turnaround Drive More Upside?
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Key Takeaways
Starbucks delivered 7.9% global comparable-store sales growth for the fourth consecutive quarter.
Operating margin rose 430 basis points to 14.4%, while EPS increased 70% to 85 cents.
Higher fiscal 2026 guidance supports recovery, but coffee costs and store closures remain key risks.
Starbucks Corporation’s (SBUX - Free Report) shares have gained 15% year to date (“YTD”), outperforming the restaurant industry, which has declined 12% over the same period.
The stock's relative strength likely reflects improving sales momentum, progress in its Back to Starbucks turnaround strategy, recovering operating margins and an improved earnings outlook. The company's latest quarterly results showed stronger customer traffic and encouraging operating performance, prompting management to raise its fiscal 2026 earnings guidance.
In the same time frame, SBUX has outperformed other industry players like McDonald's Corporation (MCD - Free Report) , Chipotle Mexican Grill, Inc. (CMG - Free Report) and Yum! Brands, Inc. (YUM - Free Report) .
Price Performance
Image Source: Zacks Investment Research
Turnaround Strategy Is Gaining Traction
Starbucks' Back to Starbucks strategy is centered on improving customer service, strengthening coffeehouse operations and restoring the brand's appeal. In the third quarter of fiscal 2026, the company delivered its fourth consecutive quarter of positive global comparable-store sales growth. Global comps increased 7.9%, reflecting improving customer traffic and stronger sales performance.
In the United States, comparable sales grew 7.9%, driven by a 4.2% increase in transactions and 3.6% growth in average ticket. Management attributed the progress to better store execution, improved staffing, menu innovation and stronger customer experiences. The limited contribution from pricing to average-ticket growth also suggests that traffic and product mix are playing important roles in the recovery.
The Green Apron Service model has helped Starbucks improve staffing, coaching and operating routines. Management reported that service-time targets were achieved across its ordering channels despite transaction growth. Food availability also approached 99%, approximately 10 percentage points higher than a year earlier. These improvements could support customer satisfaction, repeat visits and more consistent performance across coffeehouses.
Menu Innovation and Rewards Support Sales Growth
Product innovation and marketing are providing additional growth opportunities. Starbucks' Refreshers platform delivered double-digit year-over-year revenue growth in the United States during the third quarter. Customizable beverages and new flavors have helped attract customers across different age groups and dayparts. Management also highlighted the growing opportunity to boost afternoon visits through beverages, food offerings and improved merchandising.
The revamped Starbucks Rewards program is another potential growth driver. Active 90-day membership in the United States reached 35.8 million, with engagement and average stored-value card reloads exceeding management's expectations. A stronger loyalty ecosystem could encourage more frequent visits and deepen customer relationships.
Starbucks is also improving its coffeehouse environment. The company surpassed 1,000 coffeehouse uplifts across North America ahead of its fiscal 2026 target and aims to complete at least 1,500 by year-end. Early results indicate higher transactions across store formats and ordering channels, while the upgrades cost approximately $150,000 per location on average. The relatively modest investment could support customer experience improvements without the disruption associated with extensive remodels.
Margin Recovery and Higher Guidance Offer Support
Starbucks' profitability is showing signs of recovery. Third-quarter consolidated operating margin expanded 430 basis points year over year to 14.4%, while earnings per share increased 70% to 85 cents. Sales leverage, cost savings and improved operating execution supported margin expansion.
The company remains on track with its $2 billion gross cost-savings plan through fiscal 2028. It also repaid approximately $1.8 billion of debt using part of the proceeds from its China transaction, lowering leverage to 2.9 times and strengthening financial flexibility.
Management raised its fiscal 2026 adjusted EPS guidance to $2.55-$2.65 and expects consolidated operating margin to exceed 11%. It anticipates U.S. comparable-store sales growth of more than 6% and global comps growth approaching 6% for the full fiscal year. These targets suggest continued improvement, although successful execution remains essential.
Costs, Store Closures and Execution Remain Risks
Despite the encouraging trends, Starbucks faces several challenges. Third-quarter consolidated revenues declined approximately 1% year over year to $9.3 billion, largely because the transition of its China retail business to a joint venture changed how revenues are reported. Although the new structure is intended to create a more capital-efficient international business, the long-term economics remain subject to execution and market conditions.
Coffee costs continue to pressure margins, while persistent weakness in consumer sentiment could constrain discretionary spending. Starbucks also acknowledged that some North American coffeehouses may require closure because of weak performance, location issues or unattractive economics. Net new company-operated store growth in North America could remain modest through fiscal 2027.
Additionally, part of the third-quarter margin improvement benefited from reciprocal tariff refunds. Management indicated that the company had largely received the refunds to which it was entitled, making sustained improvement increasingly dependent on sales growth and operational efficiencies.
SBUX’s Estimate Revision Trend
The Zacks Consensus Estimate for SBUX's fiscal 2026 and 2027 EPS moved down in the past 30 days, indicating negative sentiment among analysts for its earnings. The company's earnings in fiscal 2026 and 2027 are likely to witness growth of 21.6% and 21.6% year over year, respectively.
Image Source: Zacks Investment Research
Taking a Look at Starbucks’ Valuation
SBUX stock is trading below the industry. With a forward 12-month price/sales ratio of 2.83X, below its industry average. Meanwhile, other industry players like McDonald's, Chipotle Mexican Grill and Yum! Brands are trading at 5.95X, 2.75X and 4.6X, respectively.
P/S (F12M)
Image Source: Zacks Investment Research
Is SBUX Stock a Buy Now?
Starbucks' improving traffic, product innovation, operating discipline and higher earnings outlook support the case for further recovery. However, cost pressures, potential store closures and the need to sustain comparable-sales growth could limit upside. With a Zacks Rank #3 (Hold), investors may prefer to monitor the company's progress in delivering profitable growth before taking a more aggressive position in the stock.
View the Zacks #1 Rank List
Image: Bigstock
Starbucks Stock Gains 15% YTD: Can Its Turnaround Drive More Upside?
Key Takeaways
Starbucks Corporation’s (SBUX - Free Report) shares have gained 15% year to date (“YTD”), outperforming the restaurant industry, which has declined 12% over the same period.
The stock's relative strength likely reflects improving sales momentum, progress in its Back to Starbucks turnaround strategy, recovering operating margins and an improved earnings outlook. The company's latest quarterly results showed stronger customer traffic and encouraging operating performance, prompting management to raise its fiscal 2026 earnings guidance.
In the same time frame, SBUX has outperformed other industry players like McDonald's Corporation (MCD - Free Report) , Chipotle Mexican Grill, Inc. (CMG - Free Report) and Yum! Brands, Inc. (YUM - Free Report) .
Price Performance
Image Source: Zacks Investment Research
Turnaround Strategy Is Gaining Traction
Starbucks' Back to Starbucks strategy is centered on improving customer service, strengthening coffeehouse operations and restoring the brand's appeal. In the third quarter of fiscal 2026, the company delivered its fourth consecutive quarter of positive global comparable-store sales growth. Global comps increased 7.9%, reflecting improving customer traffic and stronger sales performance.
In the United States, comparable sales grew 7.9%, driven by a 4.2% increase in transactions and 3.6% growth in average ticket. Management attributed the progress to better store execution, improved staffing, menu innovation and stronger customer experiences. The limited contribution from pricing to average-ticket growth also suggests that traffic and product mix are playing important roles in the recovery.
The Green Apron Service model has helped Starbucks improve staffing, coaching and operating routines. Management reported that service-time targets were achieved across its ordering channels despite transaction growth. Food availability also approached 99%, approximately 10 percentage points higher than a year earlier. These improvements could support customer satisfaction, repeat visits and more consistent performance across coffeehouses.
Menu Innovation and Rewards Support Sales Growth
Product innovation and marketing are providing additional growth opportunities. Starbucks' Refreshers platform delivered double-digit year-over-year revenue growth in the United States during the third quarter. Customizable beverages and new flavors have helped attract customers across different age groups and dayparts. Management also highlighted the growing opportunity to boost afternoon visits through beverages, food offerings and improved merchandising.
The revamped Starbucks Rewards program is another potential growth driver. Active 90-day membership in the United States reached 35.8 million, with engagement and average stored-value card reloads exceeding management's expectations. A stronger loyalty ecosystem could encourage more frequent visits and deepen customer relationships.
Starbucks is also improving its coffeehouse environment. The company surpassed 1,000 coffeehouse uplifts across North America ahead of its fiscal 2026 target and aims to complete at least 1,500 by year-end. Early results indicate higher transactions across store formats and ordering channels, while the upgrades cost approximately $150,000 per location on average. The relatively modest investment could support customer experience improvements without the disruption associated with extensive remodels.
Margin Recovery and Higher Guidance Offer Support
Starbucks' profitability is showing signs of recovery. Third-quarter consolidated operating margin expanded 430 basis points year over year to 14.4%, while earnings per share increased 70% to 85 cents. Sales leverage, cost savings and improved operating execution supported margin expansion.
The company remains on track with its $2 billion gross cost-savings plan through fiscal 2028. It also repaid approximately $1.8 billion of debt using part of the proceeds from its China transaction, lowering leverage to 2.9 times and strengthening financial flexibility.
Management raised its fiscal 2026 adjusted EPS guidance to $2.55-$2.65 and expects consolidated operating margin to exceed 11%. It anticipates U.S. comparable-store sales growth of more than 6% and global comps growth approaching 6% for the full fiscal year. These targets suggest continued improvement, although successful execution remains essential.
Costs, Store Closures and Execution Remain Risks
Despite the encouraging trends, Starbucks faces several challenges. Third-quarter consolidated revenues declined approximately 1% year over year to $9.3 billion, largely because the transition of its China retail business to a joint venture changed how revenues are reported. Although the new structure is intended to create a more capital-efficient international business, the long-term economics remain subject to execution and market conditions.
Coffee costs continue to pressure margins, while persistent weakness in consumer sentiment could constrain discretionary spending. Starbucks also acknowledged that some North American coffeehouses may require closure because of weak performance, location issues or unattractive economics. Net new company-operated store growth in North America could remain modest through fiscal 2027.
Additionally, part of the third-quarter margin improvement benefited from reciprocal tariff refunds. Management indicated that the company had largely received the refunds to which it was entitled, making sustained improvement increasingly dependent on sales growth and operational efficiencies.
SBUX’s Estimate Revision Trend
The Zacks Consensus Estimate for SBUX's fiscal 2026 and 2027 EPS moved down in the past 30 days, indicating negative sentiment among analysts for its earnings. The company's earnings in fiscal 2026 and 2027 are likely to witness growth of 21.6% and 21.6% year over year, respectively.
Image Source: Zacks Investment Research
Taking a Look at Starbucks’ Valuation
SBUX stock is trading below the industry. With a forward 12-month price/sales ratio of 2.83X, below its industry average. Meanwhile, other industry players like McDonald's, Chipotle Mexican Grill and Yum! Brands are trading at 5.95X, 2.75X and 4.6X, respectively.
P/S (F12M)
Image Source: Zacks Investment Research
Is SBUX Stock a Buy Now?
Starbucks' improving traffic, product innovation, operating discipline and higher earnings outlook support the case for further recovery. However, cost pressures, potential store closures and the need to sustain comparable-sales growth could limit upside. With a Zacks Rank #3 (Hold), investors may prefer to monitor the company's progress in delivering profitable growth before taking a more aggressive position in the stock.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.