Starbucks is seeing a resurgence, thanks to younger and lower-income customers

By Claudia Assis and Bill Peters

Coffee chain hikes outlook as sales top Wall Street's hopes

Starbucks' global same-store sales rose 6.2%, topping investors' expectations for an increase of 4%.

Starbucks' plan to win more customers with new drinks, faster service and a revamped loyalty program appears to be paying off - for customers of all ages and income levels.

The coffee chain late Tuesday reported a sharp rebound in sales for the quarter that ended in March, leading it to raise its outlook for the year, as more shoppers dropped by the chain for ube macchiatos, matcha, new bakery items and Energy Refresher fruit drinks.

The stock (SBUX) rose 5.6% in after-hours trading. Shares are up 21.5% over the past 12 months, as investors see the chain's turnaround efforts taking hold.

That rally has occurred as the chain tries to add warmer vibes to its coffeehouses and deliver friendlier service, following concerns over recent years that stores were too focused on churning out orders and higher prices, which alienated shoppers. And it follows concerns about the restaurant industry writ large, as higher costs for oil and other products and services ripple through the economy.

Even with Starbucks' stock on the rise through this year, some analysts have questioned whether getting back to its coffee-shop roots was the right move to win over a younger crowd perhaps geared more toward online ordering and drive-thru coffee chains like Dutch Bros. (BROS).

But Starbucks executives on Tuesday said new beverage options like cold foam and protein were resonating with consumers, "especially among Gen Z." They also said that Gen Z and millennials had come to view the Starbucks brand more favorably.

"More customers now believe their Starbucks purchase is worth it compared to a year ago," CEO Brian Niccol said during the coffee chain's earnings call on Tuesday.

CNBC also reported last week that Starbucks' new rewards program had drawn more people seeking cheaper options. During Starbucks' earnings call on Tuesday, Niccol said the chain was attracting both people looking to make a one-off splurge and those carrying out their daily caffeine rituals.

"If it's on the low-income side, where it is seen as a bit of a splurge and it's a little bit of indulgence, then by all means, we need to have those drinks that they want," he said. "We need to give them the experience where they feel like for their hard-earned dollar was well worth spending."

He added that lower-income shoppers often dropped by earlier in the day to buy its Energy Refreshers for a caffeine boost. Higher-income consumers, he said, often dropped by for them later in the day. Niccol said that more than 300 stores had been upgraded with comfier seats and other touches intended to be more welcoming.

In February, McDonald's (MCD) said its focus on cheaper options had brought back lower-income consumers, who have been hit harder by the past half-decade of inflation. However, the chain still said the year ahead could be rough.

Starbucks on Tuesday said its global same-store sales rose 6.2% during its second quarter, whereas investors expected an increase of 4%. The company pinned that on a 3.8% increase in comparable transactions and a 2.3% rise in its average ticket.

U.S. same-store sales did even better - they rose 7.1%. And the company did well on revenue and per-share profit, beating Wall Street's expectations there too.

The quarter "marked the turn in our turnaround as our 'Back to Starbucks' plan drove both top- and bottom-line growth," Niccol said in a statement.

Starbucks said it expects 2026 global and U.S. same-store sales growth of 5% "or greater." That would be considerably more than Wall Street's expectations for 3.8% and would follow two years of same-store sales declines.

The company's fiscal second-quarter revenue rose 9% to $9.5 billion, which compares with expectations for $9.2 billion.

Starbucks reported a quarterly non-GAAP profit of 50 cents a share, compared with estimates for 43 cents a share, according to FactSet.

-Claudia Assis -Bill Peters

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04-28-26 2021ET