By way of a comeback story, Starbucks has recorded a modest but significant turnaround in global comparable sales—a result that will raise hopes of a recovery under the leadership of new CEO Brian Niccol—yet at the same time the company faces persistent cost pressures that threaten its profitability.
In the quarter ended most recently, Starbucks posted global comparable sales growth of 1%, marking its first such gain for more than a year and a half. The growth was driven largely by international markets—while in the US, its largest market, comparable sales were flat and the average spend per customer actually fell.
International markets provide the momentum
While the US business continues to struggle under pressure from inflation-weary consumers cutting back on eating and drinking out, Starbucks found a degree of growth in its overseas operations. In the key China market—its second largest after the US—comparable sales rose by 2% year-on-year. In China, Starbucks has also been lowering prices for non-coffee products and emphasizing local flavor and customization to win back consumers.
International progress is a meaningful development for Starbucks, as the turnaround of its US business appears incremental at this stage. Niccol, who took over in August 2024, launched a brand reset initiative dubbed “Back to Starbucks,” which has involved simplifying the menu, accelerating service, and closing underperforming stores.
US business is still muted
In the US, Starbucks’s journey remains fragile. Despite the brand reset, comparable sales were flat. The drop in average spend per customer suggests US consumers are scaling back purchases. Starbucks executives noted that economic uncertainty and inflation are weighing on consumer behavior. The company plans to invest more heavily in labor hours for US company-operated stores—for example, more than half a billion dollars of additional labor hours is planned over the next year.
Margin squeeze looms as costs bite
Despite the modest sales uptick, Starbucks’s margin picture is troubled. Wholesale coffee bean prices are up significantly: raw Arabica beans have climbed more than 20% in 2025, after an earlier surge of roughly 70% in 2024. Added to that are higher tariffs on imported goods, investment costs tied to the turnaround effort, and rising labor and rent costs worldwide. These cost burdens pushed Starbucks’s operating margin down dramatically, to just 2.9% in the latest quarter versus 14.4% a year ago.
Strategic pivot and outlook for the future
The combination of a sales inflection point and cost headwinds places Starbucks at a strategic inflection. The “Back to Starbucks” brand reset illustrates the company’s willingness to make structural changes: closing 627 stores in the fourth quarter as part of the restructuring.
Looking ahead, Starbucks has suspended forward guidance and plans to provide an updated outlook at an investor event in January. For the rest of 2025 and into 2026, key questions include: Will Starbucks convert the global sales uptick into meaningful earnings growth? How quickly will the US business accelerate? Can Starbucks contain or pass on cost pressures to consumers without further dampening demand?
Implications for the broader retail coffee sector
Starbucks’s results send broader signals for the global specialty-coffee and quick-service restaurant sector. A stabilization in comparable sales growth, even at 1%, is encouraging in a sluggish consumer environment. Yet the rapid rise in commodity costs and competitive intensity means that brands must lean hard on operational discipline, menu innovation, and local relevance in international markets.
For investors and industry observers, the headline figure of a 1% global comparable-sales rise is the first green shoot in Starbucks’s turnaround, but the sharp margin decline underlines that sales alone aren’t enough. Profitability will hinge on managing cost inflation, optimizing store footprints, and reengaging consumers in the US and abroad.
Starbucks seems to have made progress in its growth, but the true challenge now lies in its ability to convert this growth into a robust operating profit and leverage its global reach amidst intense cost and competitive pressure.
