Grande expectations: Starbucks back on the offense

What happened

Starbucks reported comparable sales growth of 7.2%, driven by more customer visits and higher spending per order, while profitability rose 54%. The company said its turnaround under CEO Brian Niccol is in its early innings and it is finally back to playing offense.

Confirmed

Global impact / market context

Higher profit per sale gives Starbucks more cash from each transaction to cover costs and fund its turnaround, which means the strategy may need less borrowed money to keep going. If profit keeps improving, investors could look past the sales miss and focus on earnings growth instead.

Analyst inference

Shares were under pressure before and after the report because sales fell short, showing investors still want revenue growth, not just better profit. Analysts cited in the article see profit gains supporting the turnaround story, so buyers and sellers are still debating whether the recovery can last.

Analyst inference

What to watch

1. Watch whether comparable sales growth of 7.2% continues, since it came from both more customer visits and higher spending per order, including more food and cold foam. Confirmed
2. Watch whether the company's upbeat outlook translates into higher profit in its next fiscal year, a point analysts raised, without a renewed sales miss. Proposed
3. Watch costs and cash available, because wider profit per sale means more money from each transaction, which could fund capital spending, meaning money put into stores and equipment, without extra borrowing. Analyst inference

Evidence

• seekingalpha.com